1951-06-13

HOUSE OF COMMONS DEBATES


[Stage Direction]
Wednesday, June 13, 1951


Hon. Edouard Rinfrel (Postmaster General):: Mr. Speaker, I rise on a question of privilege. My attention has been called to an editorial appearing in the Globe and Mail of this morning.


An hon. Member:: What a paper!


Édouard-Gabriel Rinfret: It is headed "Mr. Rinfret's distorted figures", and it goes on to say that the attack on the Globe and Mail was wholly based on misrepresentation. I quote:
Mr. Rinfret read the text of a letter sent by the Globe and Mail . . .
There is no getting away from it; the Globe and Mail actually sent the letter.


Mr. Graydon:: The minister is just finding that out now.


Mr. St. Laurent:: The hon. member is just finding it out now. We knew it.


Gordon Graydon: I take much pleasure in doing so.


Édouard-Gabriel Rinfret: I have already stated to the hon. member for Peel (Mr. Graydon) that the letter I read into the record the other day was under the heading of the Globe and Mail. At his request I disclosed the name of the paper. I had no intention of doing so myself.
The extra mailing costs under these rates were figured by the Globe and Mail at $3.90 a year. I am supposed to have said that in fact it was only $1.70. What I said, Mr. Speaker, was that the impact under the new amendment was $1.06 gross, and, after deduction of federal and provincial income taxes, would come to only 53 cents net per subscriber per year. I continue reading the article:
In order to make this charge, Mr. Rinfret had to distort the facts and figures clearly stated in the letter. The letter did not say or suggest that the proposed new rates meant $3.90 in extra postage. What it said was this:
I leave it to the house to decide whether the correct interpretation is the one I put on the matter or is the one the editorial puts on it.
"Under the new postal rates, announced May 21, the postage on a year's subscription has increased $3.90 since 1938-and only now is part of this increased cost being passed on to our readers."
Referring to the new postal rates, the editorial says that there have been quite a number of changes in the rates since 1938. I want to tell the house that there has been no change in the law with regard to the postal tariff since 1933. Since that date it has stayed at one and a half cents and a surcharge of four cents on all advertising content over fifty per cent. It is true that during the war, from 1943 to 1946, the clause with respect to the fifty per cent advertising content was suspended. But if we compare the figures between now and 1938, this period of three years should not be taken into consideration.
I made the calculation in the house that the Globe and Mail have 30,380 mail subscribers, and that last year they paid $119,000, which represented $3.91 for each subscriber. I made the same calculation with the new rates of two and a half cents and four cents, which would bring their total bill to $151,366; this, divided by 30,380 mail subscribers, would be $4.98 for each subscriber yearly. As I said in the house, that is an increase of $1.06 before deduction of income tax and 53 cents after deduction of tax. If I am to take the figures of the Globe and Mail, they show that between 1938 and 1950 their mailing costs have increased by $1.95, whereas under the new law the increase will be $2.89. Therefore the impact of the new law, according to the figures of the Globe and Mail, is only 94 cents gross and 47 cents net.
The real impact on the costs of the Globe and Mail will be 20 per cent of two per cent. The mailing costs of the Globe and Mail represent about 2 per cent of their total costs. From now on their mailing costs will be figured at 2.4 per cent instead of 2 per cent.
As I indicated to the house, the increase in postage charges to the Globe and Mail as a result of the provisions of the new Post Office Act will be $32,366 before deduction of income tax, and $16,183 after deduction of income tax. The charge that is now made by the Globe and Mail to their midi subscribers
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Postal Service
is 30,380 multiplied by $3, or $91,140, or a profit of $74,957. The increase to mail subscribers is therefore more than 5J times the increase in the postage rates provided for in the new act.


Gordon Graydon: May I ask the minister just one question? Is he aware that he would not have got into all this trouble had he not read mail addressed to people other than himself?


Édouard-Gabriel Rinfret: According to the interpretation of the act by some hon. members in the house the other day, the Postmaster General is supposed personally to deliver mail in the country. This letter was addressed to the postmaster.


Gordon Graydon: You are not supposed to read other people's mail.


Édouard-Gabriel Rinfret: The letter was addressed-


Some hon. Members:: Order.


Mr. Speaker:: Order. The Postmaster
General has been asked a question, and he should be permitted to answer.


Édouard-Gabriel Rinfret: The letter was addressed to the postmasters or the rural couriers, which belong to the department of which I am the head, and I had the right to read that letter.


Gordon Graydon: No, you did not.


Mr. Pouliot:: Well said.



RAILWAYS, CANALS AND TELEGRAPH LINES

[Stage Direction]
Seventh report of standing committee on railways, canals and telegraph lines.-Mr. Whitman.

[Stage Direction]
Second and third reports of special committee on veterans affairs.-Mr. Mutch.

['That the message of His Excellency the Governor General, dated May 1, 1951, together with item No. 650 of the estimates for 1951-52, which was reported on this day by the special committee on veterans affairs, be referred to the committee of supply.']
Hon. Alphonse Fournier (Minister of Public Works) moved:: That the message of His Excellency the Governor General, dated May 1, 1951, together with item No. 650 of the estimates for 1951-52, which was reported on this day by the special committee on veterans affairs, be referred to the committee of supply.


[Stage Direction]
Motion agreed to.

[Stage Direction]
Second report of standing committee on external affairs.-Mr. Bradette.

['for leave to introduce Bill No. 374, respecting an income tax convention between Canada and France.\nMotion agreed to and bill read the first time.']
Alphonse Fournier: That votes 84 to 111 inclusive, and vote 566 of the main estimates 1951-52, approved and reported upon by the standing committee on external affairs this day, be referred back to the committee of supply.


[Stage Direction]
Motion agreed to.

Hon. J. J. McCann (Minister of National Revenue) moved: for leave to introduce Bill No. 372, respecting an income tax agreement between Canada and Sweden.


Mr. Knowles:: Explain.


James Joseph McCann: This bill and the two which follow on the order paper, Mr. Speaker, are presented to confirm agreements between the countries named, with a view to avoiding double taxation. They are similar to bills that were introduced at former sessions and enactments that are already in operation as between Canada and the United States and Canada and the United Kingdom. Two of them refer to income tax agreements and one to the succession duty convention.
Motion agreed to and bill read the first time.


CANADA-FRANCE-SUCCESSION DUTY-APPROVAL OF CONVENTION AND PROTOCOL SIGNED AT PARIS, MARCH 16, 1951
James Joseph McCann: for leave to introduce Bill No. 373, respecting a succession duty convention and protocol between Canada and France.
Motion agreed to and bill read the first time.


CANADA-FRANCE  INCOME TAX    APPROVAL OF CONVENTION SIGNED AT PARIS, MARCH 16, 1951
James Joseph McCann: for leave to introduce Bill No. 374, respecting an income tax convention between Canada and France.
Motion agreed to and bill read the first time.



QUESTIONS


NATIONAL DEFENCE


Mr. Macdonnell (Greenwood):: 1.	How many civilian employees are engaged in the Department of National Defence?
2.	What is the total cost of civilian personnel, including salaries, wages and all other expenses?


Mr. Campney:: I have discussed with the hon. member for Greenwood this question and the three following questions on the order paper, and with his concurrence I would ask that they be dropped. I understand that the hon. member is redrafting the questions, and that when redrafted they will appear on the order paper in due course.


Mr. Speaker:: The first four questions in the name of the hon. member for Greenwood are dropped.


Mr. Macdonnell (Greenwood):: May I make it quite clear that they are being replaced by other questions.




Mr. Macdonnell (Greenwood):: 1.	In how many locations in Canada do civilian employees of the Department of National Defence number more than (a) 10; (b) 50; (c) 100; (d) 500; (e) 1,000?
2.	What are the names of the stations where there are more than 500 civilian employees located; who is in charge of each such station, and what has been his business or executive experience?


Mr. Speaker:: Dropped.


Mr. Macdonnell (Greenwood):: 1.	In how many different locations in Canada are civilian employees of the Department of National Defence stationed?
2.	In what different types of employment such as office workers, mechanics, etc., are such civilian employees engaged, and how many are there in each category?


Mr. Speaker:: Dropped.



NATIONAL DEFENCE-SENIOR EXECUTIVES

Mr. Macdonnell (Greenwood):: 1.	(a) What are the names of the senior fifty executives in charge of civilian staff in the Department of National Defence; (b) which of these are civilians and which service personnel; (c) what is the military and what is the civilian experience of each as shown in his file; (d) where is each such executive stationed?
2.	Who of (a) the above named executives, and (b) the total civilian employees, in the Department of National Defence, are employed pursuant to the terms of the Civil Service Act?


Mr. Speaker:: Dropped.



SEARCH AND RESCUE SERVICES

Mr. Higgins:: 1.	Does air-sea rescue services function in Newfoundland throughout the whole province? If so, how many vessels of the sea>
branch are stationed in Newfoundland and where are they stationed?
2.	How is the present air-rescue service made up with respect to manpower and equipment?


Mr. Campney:: 1.	Yes, but there is no sea branch as such. See answer to No. 2 regarding secondary facilities, which includes two vessels stationed at St. John's, Newfoundland.
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2.	Rescue co-ordination centres of the search and rescue organization are established and manned by the Royal Canadian Air Force, including that for the east coast at Halifax. There is a rescue detachment with two aircraft at Torbay, Newfoundland.
3.	All search and rescue facilities and equipment maintained solely for search and rescue duties are supplied by the Royal Canadian Air Force. Other facilities forming part of the integrated search and rescue organization instantly available for search and rescue operations, when required, are supplied by the Royal Canadian Navy, Canadian Army, Royal Canadian Air Force, Royal Canadian Mounted Police, Department of Transport, Department, of Fisheries, Department of National Revenue and Department of Mines and Technical Surveys.



CROSS POINT, QUE., INDIAN RESERVE- ROAD PAVING

Mr. Couriemanche:: 1.	Was any road paving done at the Indian reserve of Cross Point, Bonaventure county, Quebec, during 1950?
2.	If so, who was awarded the contract?
3.	At what price?
4.	Were tenders called for such work?
5.	If so, what are the names of those who tendered, and the amount of their respective tenders?


Mr. Harris (Grey-Bruce):: 1.	No road paving was done by the Department of Citizenship and Immigration on the Indian reserve at Cross Point, Quebec, during 1950. However, a provincial highway traverses this reserve, the maintenance of which is not a federal government responsibility.
2,	3, 4, and 5. Answered by No. 1.



MAGNETOMETRIC SURVEY OF PROVINCE OF NEWFOUNDLAND

Mr. Higgins:: What steps have been taken to implement the request by the province of Newfoundland for a magnetometric survey of the province?


Mr. Prudham:: None. On February 15, 1950, a request was made by the government geologist of Newfoundland for an airborne magnetometer survey of a section of Newfoundland south of Notre Dame bay. It was impossible at that time, because of the limited facilities available, to accede to that request. There has been no further request of this nature from the province of Newfoundland.
As there is only one federal government airborne instrument for all Canada, and as surveying by this method is still in the experimental stage, there has been no attempt to make surveys of this kind by

Orders for Returns
provinces. However, special attention is being given to geological regions where it is thought that the experiment will be most effective.



ESTABLISHMENT OF NATIONAL HARBOURS IN NEWFOUNDLAND

Gordon Francis Higgins: What steps have been taken to establish a national harbour or harbours in Newfoundland?


Mr. Benidickson:: On February 28 last a
reply was given to a related question asked by the hon. member. There have been no subsequent developments.



DEFINITION OF BOUNDARY BETWEEN NEWFOUNDLAND AND QUEBEC

Gordon Francis Higgins: What work is being done this year on the definition of the boundaries between the province of Newfoundland and the province of Quebec?


George Prudham: None.



QUESTIONS PASSED AS ORDERS FOR RETURNS


Mr. Black (Cumberland):: 1.	What properties have been purchased, by provinces, since April 1, 1950, to date by (i) Department of National Defence; (ii) Department of Defence Production; (iii) crown companies; (iv) any other department of government, stating the (a) location; (b) purchase price; (c) from whom purchased; (d) date of purchase, in each case?
2.	What alterations or new construction work have been undertaken or authorized on any of the above properties since purchase thereof?
3.	What expenditures have been made to date on each of the said properties for (a) equipment; (b) administration and operation; (c) total expenditures, to date?
4.	Have any of the said properties been leased since purchase? If so, to whom, and on what terms?


Mr. Bradley:: Mr. Speaker, I understand the hon. member for Cumberland (Mr. Black) proposes to make an amendment to this question. If he would do that now, perhaps the answer could be obtained more quickly.


Mr. Speaker:: Dropped?


Mr. Claxton:: No. The hon. member for Cumberland has been good enough to terminate the third part of the question with the word "properties". The words "for (a) equipment; (b) administration and operation; (c) total expenditures, to date" will be omitted. With that understanding, the question would stand as an order for return.


Mr. Black (Cumberland):: Yes; the minister and his parliamentary assistant have conferred with me, and I am pleased to comply with that suggestion.


Mr. Speaker:: Then the question will stand as an order for return.


Brooke Claxton: Yes.



INDIANS-PRAIRIE PROVINCES    LEASES OF LAND FROM RESERVES

Mr. Bryce:: What persons have been granted leases from Indian lands on the Indian reservations of Manitoba, Saskatchewan and Alberta during the years 1949, 1950 and 1951?



CANADIAN NATIONAL RAILWAYS


Hon. Douglas Abbott (Minister of Finance) moved: that the house go into committee at the next sitting to consider the following resolution;
That it is expedient to present a measure to provide for the refunding of matured, maturing and callable financial obligations of the Canadian National Railways and for the issue of securities guaranteed by the Dominion of Canada in respect of such refunding to an aggregate principal amount not exceeding $200,000,000.
He said: His Excellency the Governor General, having been made acquainted with the subject matter of this resolution, recommends it to the consideration of the house.


Stanley Howard Knowles: Mr. Speaker, I rise to a point of order.


Some hon. Members:: Oh, oh.


Stanley Howard Knowles: It is a technical point; but if we are going to go through this form we should have it correct. In view of the fact that the governor general is out of the country-


Some hon. Members:: Oh, oh.


Stanley Howard Knowles: -and has turned the great seal over to Mr. Justice Kerwin, appointing him as Administrator, should not this approval have been given in the name of His Excellency the Administrator rather than in the name of His Excellency the Governor General?


Douglas Charles Abbott: Mr. Speaker, I think this measure was submitted some time ago. But if it will make my hon. friend any happier, I shall be very glad to have Hansard substitute the words "His Excellency the Administrator" for the words "His Excellency the Governor General".


Stanley Howard Knowles: May I ask which of these gentlemen was consulted?


An hon. Member:: Sit down.


[Stage Direction]
Motion agreed to.


[Stage Direction]
On the orders of the day:
Gordon Graydon: I should like to direct a question to the Minister of National Defence, arising out of an announcement made yesterday by the Minister of Planning and Development for Ontario, in which he indicated that the Long Branch rifle ranges had been acquired by Central Mortgage and Housing Corporation, and that plans were under way to provide some 2,000 housing units in that area.


Mr. Speaker:: Order. I suggest to the hon. member that he should ask his question directly.


Gordon Graydon: I shall do so. When does the department expect that the rifle ranges will be vacated by the military, and in what part of the county of York near Woodbridge is the new rifle range to be located?


Brooke Claxton: Mr. Speaker, as the hon. member for Peel said, this arrangement was announced simultaneously yesterday by the minister in Ontario and by myself. The time at which the change-over will be made from the existing range at Long Branch to the proposed range at Woodbridge will depend upon the time at which we can get possession of the 1,800 acres at Woodbridge, and construct on it the necessary butts, ranges, accommodation, and so on. No estimate can be made of that, because, in part, it depends upon the expropriation proceedings, and the speed with which the relatively small number of occupants of houses in the Woodbridge area will move away.
The area, generally speaking, as I recall the map-and I have not received notice of the hon. member's question-is to the north and east of Woodbridge.



PENSIONS


[Stage Direction]
On the orders of the day:
Mr. E. D. Fulton (Kamloops):: Mr. Speaker, has the Prime Minister received a telegram from the Tranquille branch of the tubercular veterans section of the Canadian Legion requesting certain action in connection with pension legislation? If so, will the Prime Minister indicate whether any action will be taken accordingly at this session?
Inquiries of the Ministry


Louis Stephen St-Laurent: Mr. Speaker, I have had no notice of such communication. As Prime Minister I receive a large number of communications, but I shall make sure about this one when I have seen the text of the hon. member's question. As to whether or not any action will be taken, that, of course, is a matter of government policy, and government policy is usually announced in the house after it has been determined by the government.



STRAIT OF CANSO BRIDGE


[Stage Direction]
On the orders of the day:
Mr. Clarence Gillis (Cape Breton South):: Mr. Speaker, I should like to ask a question of the Minister of Transport. Has the minister's attention been called to a press dispatch in the Sydney Post-Record of June 9, 1951, to the effect-


Mr. Speaker:: Order. The hon. member
should ask his question without referring to the dispatch. I realize that this presents some difficulty, but if I allow a question to be asked in this way, I do not see how I can prevent hon. members from reading press dispatches in asking questions on the orders of the day.


Clarence Gillis: I cannot very well ask the
minister a question unless I tell him what it is all about. I would ask if his attention has been called to a press dispatch, the caption of which is, "Bridge plans are abandoned". Would the minister bring the house up to date in this matter? Have the plans for the Canso bridge project been abandoned, and is it a fact that immediate work is to begin at the strait of Canso for the construction of a causeway?


Hon. Lionel Chevrier (Minister of Transport):: Mr. Speaker, I said in the House of Commons some time ago that the board of engineers established by the government to study the Canso bridge proposal had been reconvened. I had not at that time, and neither have I yet received, a report from the board, although I understand it will be forthcoming before the end of the session. When the report is before me I shall be glad to give the house the details of the recommendations contained therein-that is, after I have consulted with my colleagues. I can add nothing to the statement that has already been made.



IRRIGATION


[Stage Direction]
On the orders of the day:
Mr. M. J. Coldwell (Roselown-Biggar):: I
should like to ask the Minister of Agriculture

Inquiries of the Ministry whether the government has chosen the experts who are to give the final advice or who are to report on the South Saskatchewan river project.


Right Hon. J. G. Gardiner (Minister of Agriculture):: The recommendations of
personnel which I have made are under consideration by the government.



BUSINESS OF THE HOUSE


[Stage Direction]
On the orders of the day:
Gordon Graydon: I should like to ask a question of the Secretary of State for External Affairs. Has he any idea wnen he will find it convenient to arrange for a debate arising out of the report of the standing committee on external affairs? I know the house is anxious to meet his convenience in the matter.


Hon. L. B. Pearson (Secretary of State for External Affairs):: I hope we shall be able to discuss that report when my estimates are called on Friday of this week.



NEWSPRINT


[Stage Direction]
On the orders of the day:
Stanley Howard Knowles: May I ask the Minister of Trade and Commerce if today, or some time soon, he will make a statement on the newsprint situation, dealing not only with the international aspect of the matter but with tlje internal supply situation as well?


Right Hon. C. D. Howe (Minister of Trade and Commerce):: I expect that the estimates of the Department of Trade and Commerce will be called tomorrow, and I can make a statement at that time.



INQUIRY FOR RETURN


[Stage Direction]
On the orders of the day:
Gordon Francis Higgins: May I
ask the Minister of Public Works if he has received the consent of the premier of Newfoundland to the tabling of the correspondence and other documents referred to in a motion for the production of papers passed on May 14?


Alphonse Fournier: If it has been received in the department, I have not seen it. I shall attend to the matter immediately.
[Mr. Coldwell.l



TOBACCO


[Stage Direction]
On the orders of the day:
Mr. E. B. Huffman (Kent, Onl.):: I should like to direct a question to the Minister of Trade and Commerce, or to the department concerned. In view of the revenue the government derives from the tobacco industry, and the need for an export market to stabilize the industry, can the minister indicate whether Canada will be represented at the first world tobacco congress to be held at Amsterdam in the latter part of September of this year?


Clarence Decatur Howe: I received notice of this question only since coming to the house this morning. The government is well aware of the need of the tobacco industry for an export outlet. I can tell my hon. friend that negotiations are under way which it is believed will add considerably to Canadian exports to the United Kingdom during the current year. As to attendance at Amsterdam, I shall be glad to consult my staff, and also the Secretary of State for External Affairs (Mr. Pearson), and give my hon. friend an answer later.



PRAIRIE FARM REHABILITATION


James Garfield Gardiner: that the house go into committee to consider the following resolution:
That it is expedient to introduce a measure to amend the Prairie Farm Rehabilitation Act to provide for the appointment and superannuation of certain officers and employees necessary for carrying out the provisions of the act, and to provide further that no projects involving an expenditure in excess of ten thousand dollars shall be undertaken without the consent of the governor in council.
Motion agreed to and the house went into committee, Mr. Dion in the chair.


Mr. Argue:: Mr. Chairman, will the Minister of Agriculture explain what is involved in this amendment?


James Garfield Gardiner: The committee will recall that when the Prairie Farm Rehabilitation Act was passed in 1935 it was for a limited period of five years. When the act was amended in 1936 it continued the effect of the legislation indefinitely without a named period. The section having to do with appointments was left as it was in the 1935 act,

namely, that, appointments were not to be made by the civil service commission.
The act has been in operation since 1936 in its present form, and the government has concluded that there is reason for believing that this legislation will be more or less permanent. It will be to the advantage of the persons employed under the act to be under superannuation and considered as civil servants so far as certain classifications referred to here are concerned.
One of our difficulties in connection with the administration of the act is that these officials have been so carefully appointed and trained that other departments of government and others outside the government seek to hire them away from us, particularly the engineers engaged on irrigation and water activities generally. The most recent case was that of Mr. MacKenzie, our chief engineer, who has been lent to another department. When Mr. MacKenzie was lent this matter was discussed with him and others, and we are presenting this amendment in order to put our technically qualified officials on much the same basis as similar officials in other departments. We are asking that engineers, clerks and stenographers come under the civil service and have the benefits of superannuation.
The other section of the bill increases from $5,000 to $10,000 the amount of expenditure which the minister may decide upon without the consent of the governor in council. This is being done throughout the different departments, and section 2 of the bill simply applies the same principle to the Prairie Farm Rehabilitation Act.


Edmund Davie Fulton: Is the minister in a position
to indicate to the committee in a general way whether the project to make the Prairie Farm Rehabilitation Act of direct application to British Columbia and other parts of eastern Canada has advanced to the point where a decision has been reached? As the minister knows, certain operations are being undertaken in British Columbia by engineers of the P.F.R.A. They have to be carried on under a sort of special set-up which I understand is a little awkward. It seems to me that with respect to developments that we hope for in the future it would be much easier and more regular if the act had direot application to our province, and perhaps to other provinces as well.


James Garfield Gardiner: At the present time the
Prairie Farm Rehabilitation Act applies only to what is generally known as the Palliser triangle. It may be said that the area covered extends a little beyond the boundaries of the
Prairie Farm Rehabilitation Act Palliser triangle, but that is done in order to take in entire river basins. But generally speaking it applies only to the Palliser triangle or what is generally known as the drought area.
There is a provision in the act for making available the services of our engineering staff in connection with all kinds of water developments. This is done quite broadly, even outside the P.F.R.A. area. A committee was set up in 1943, and it recommended to the house that this legislation be made applicable to a much wider area. It was recommended that, to all intents and purposes, something similar be made to apply right across Canada. Since that time the matter has been up for discussion on a number of occasions. Because of some disagreement in the dominion-provincial conference with regard to finance, action was delayed. Bills were drafted which provided for the extension of the principle right across Canada, including diking in the eastern part of Canada, works in the province of British Columbia and elsewhere, and all along the northern fringe of settlement. But that legislation, which was introduced into the house in the session before last, I believe, and then withdrawn later in the session because of the fact that the meeting of the dominion-provincial conference had not been held, was prepared again for this session. However, on account of all the discussion with regard to extra expenditures on defence, it was intended to make this more or less a defence session to deal with defence expenditures, and it was not thought wise to take up new responsibilities this year.
That is the position at the moment. The government saw to it that legislation was drafted to make this extension a possibility, but it was not considered wise to bring it in at the present session.


Edmund Davie Fulton: I am very glad to hear that,
because I think we can take it from the minister's reply that the matter is not dropped, but is merely postponed for the time being. It is still definitely a possibility?


James Garfield Gardiner: That is right.


Major James William Coldwell: This resolution foreshadows legislation that will be generally welcomed by the house, and particularly by those members who come from western Canada. The minister is quite right when he says that we can now look upon this legislation as permanent; consequently the officials who operate under the Prairie Farm Rehabilitation Act should be brought under the civil service commission, with all the advantages, both to the civil servants themselves and to the

Prairie Farm Rehabilitation Act country, which flow from so doing. I refer to superannuation, and so on. I think that is fair, and besides, it will tend to eliminate-at least I hope it will-the appointment of persons whose interests are not always in the P.F.R.A. but in a political situation. When I was in my constituency last autumn it was reported to me by farmers that they had been asked to produce titles to their properties, a-nd that I had been responsible for certain questions in the house which had made that necessary. Of course that was absolutely and entirely wrong, but the impression was left by that official that I had been endeavouring to do something quite the opposite to what we of this group had been trying to do in the preceding session. Therefore I hope this legislation will result in the appointment of the type of official with respect to P.F.R.A. who will foe entirely interested in water conservation.
I believe the P.F.R.A. is really one of the good things that has been done by this parliament for the prairie provinces over the years. I say "this parliament" advisedly, because for a good many years, even before the Prairie Farm Rehabilitation Act was brought into parliament and its administration into existence, water conservation in the prairie provinces had been something which we had been anxious to see undertaken. The officials, engineers, and so on, of the P.F.R.A. organization have done a commendable job in this respect, but, as the minister says^ we can now expect that the P.F.R.A. will be permanent; consequently the necessary steps should be taken to ensure that permanency.
As the minister indicated in his remarks, irrigation is one of the projects which will have to receive considerable attention. I think he should do everything he can to retain in the employ of the department the engineers who have been responsible for P.F.R.A. up to the present and who have been working on it. If it is a matter of emolument of office, the government should give consideration to seeing to it that the remuneration of these engineers is such that they will be retained in the service of the government, because, as I say, in my opinion they have done a good job.
A few minutes ago on the orders of the day it occurred to me, following the question of the hon. member for Cape Breton South, that I might ask whether the government had decided to appoint the experts which the minister said he thought would still be necessary to advise the government in order to bring about a final decision by the government on the South Saskatchewan river plan.
I have been surprised to find that no final decision has been taken, because the people 
of western Canada have been led to believe over the past few years that everything was settled. Indeed, as early as 1946, on April 27, the Minister of Agriculture spoke at the city hall in Regina, and the Leader-Post, which I take it can be regarded as being fairly reliable in its news reports of such meetings, stated:
Mr. Gardiner emphasized that the federal government did not need to wait for suggestions or pressure from municipal governments, municipalities, societies or any other groups before proceeding with its water conservation plan. The dominion government had already mapped out a program, and it was a program involving $110 million. This would be used largely in providing for the storage of water and partly for the distribution of this where needed. The dominion government thus did not need the endorsation of the South Saskatchewan river development association to begin work on the South Saskatchewan river. It had already decided to go through with it.
Consequently we all thought that a decision had been made. If this article had stood alone, one might perhaps have thought that the newspaper reporter had overemphasized the words of the minister, but on several other occasions he made similar statements. On May 21, 1946, we find there is an article in the Leader-Post, being a dispatch by the staff reporter of that paper from Ottawa. It deals with what the minister told the house. I have a distinct recollection of it. I have not looked up the exact words, but they are quoted here. The report reads:
"We are prepared to dig ditches; to make that water available as soon as there is an organization at the other end of the ditch to use the water."
On July 12, 1947, there is a dispatch in the Leader-Post from Lethbridge, reading in part as follows:
In this connection Mr. Gardiner pointed out the dominion government had no intention of selling or distributing power. "Our intention is to construct dams and storage reservoirs and connecting canals. When these are completed we will deliver the water in accordance with agreement previously reached."
I understand that discussions have taken place recently with the government of Saskatchewan as a result of which a tentative agreement has been made as to apportionment of the costs, and that the minister has received confirmation in writing of the tentative understanding to assume its share of the costs stated from the province of Saskatchewan.
In view of the statements that have been made over the years as to this project, we are most anxious to see construction of the dam begun immediately in order that the irrigation project may be proceeded with. This is not a new subject of discussion in the house. Hon. members who have been here for many years have heard it discussed again and again.

Prairie Farm Rehabilitation Act


James Garfield Gardiner: Mr. Chairman, on a point of order, may I say that the larger irrigation projects are not under the P.F.R.A. vote. They are not conducted directly under this act. I do not like a discussion to start which might have to be stopped a little later on, after certain ideas had been expressed by some hon. members. I am raising the question of order at this time, before the discussion goes so far that others may feel it necessary to speak on the South Saskatchewan project.


Major James William Coldwell: I do not want to transgress the rules; I try to abide by them closely, but my understanding is that these officials of the P.F.R.A. are engaged in surveys for this project. If the minister himself had not mentioned irrigation in connection with these engineers, while I had these quotations in my desk ready for a suitable occasion, probably I would not have discussed the matter now. But I thought this might be an opportune moment to bring it to the attention of the minister and exert more pressure on the government in order that this project may be commenced. If I am not in order I certainly will not proceed, but in view of the fact that these officials are conducting surveys in connection with this project, and that the minister himself had said that other departments were trying to steal the engineers who are dealing with it, I thought that gave me an opportunity to bring a little more pressure on the government with a view to having this work started immediately.


James Garfield Gardiner: Still on the point of order, Mr. Chairman, there is a great deal of activity and work in connection with irrigation in addition to these larger projects. A considerable part of P.F.R.A. work is in connection with such projects as East End and Val Marie, which do involve irrigation. To put the matter quite fairly, however, I think the only part of the work associated with the South Saskatchewan which P.F.R.A. has been doing is the investigational work.


The Chairman:: The present resolution
relates to a specific measure, and I do not think that under it we can discuss the whole question of irrigation.


Major James William Coldwell: Well, Mr. Chairman, I do not want to dispute your ruling, but I thought in view of what this involves I was right in discussing these matters at this time. However, I have pretty well said what I wanted to say-that is, to press the government to begin this project at once and fulfil the promises the minister has made from time to time concerning it.


James Garfield Gardiner: That is the very question on which I do not want to get into a discussion. I do not make promises; I state facts.


Hazen Robert Argue: When did you quit?


James Garfield Gardiner: In the thirty-eight years I have been in politics I have never made promises to anybody. I have waited until it was a matter of fact and could be stated as something with which we were going to proceed; then I have said we were proceeding with it.


Major James William Coldwell: In the quotations I have read I think the minister said clearly the fact was that this project would be started. On October 20, 1941, he is reported as having said:
Most of the money would be provided by the federal government, because it could not be expected that Saskatchewan, subject to drought, could carry the load of such a capital expenditure.
Now that the province has agreed to pay a substantial proportion of the cost, the work should be undertaken without further delay.


James Garfield Gardiner: This morning I was going over a return ordered by this house having to do with this very matter; I will see that it is brought down within the next week. It has all the papers, and the facts do not bear out the statement that I made any promises to anybody. I read them all this morning.


Mr. Quelch:: I was going to ask the minister some questions about the Red Deer diversion project, but I presume he would prefer that I wait until we ccme to item 46 of the estimates. However, I should like to ask one question about these officials who may be superannuated in future. Just what officials are included? I take it that would mean the engineers and district supervisors; and does it include the field supervisors as well?


James Garfield Gardiner: That is all in the bill. It includes engineers, clerks and stenographers -that is, generally speaking the inside staff plus the engineering staffs who are outside. It does not include all persons engaged in engineering work, such as the rodmen and others who are appointed to engineering parties that go out in the summer. They are not included. It is the general interpretation adopted by the various departments of the government.


Victor Quelch: I take it, then, that it will include the district supervisors. It has been suggested that some of those are what might be termed political appointees. It just happens that the supervisor in the special areas of Alberta was a defeated Liberal candidate, but in spite of that fact he happens to be a particularly good man and thoroughly familiar with the work. Therefore we are glad he is in that position.


Mr. Wright:: I understand some survey parties under P.F.R.A. have been working out of The Pas in Manitoba for the past two

Prairie Farm Rehabilitation Act years. Is any report available as to what they have accomplished in connection with that survey?


James Garfield Gardiner: There are reports, but projects of that kind are in the class I spoke of a few moments ago, that is, they are outside what is generally known as the P.F.R.A. area, and are made as the result of requests from the province, as a rule, or some city or village or municipality. This department or the government would not necessarily be bound by any reports made in connection with them. We read the reports; of course; but only portions of the investigational work on that northern project which has been referred to have been completed and referred to us, and I do not think they could be properly discussed under this legislation.


Percy Ellis Wright: They are being paid out of these moneys, and I think the engineers are under P.F.R.A. I should think their reports ought to be available to members of the house when they are made. Many of us are interested in this survey, and certainly I would appreciate it if the minister could see that as these reports are made they become available to members of the house.


James Garfield Gardiner: I might point out that we accepted a suggestion from the opposition yesterday or the day before that a committee should be set up to redraft the rules of the house in order to save time. The rules of the house, and those of other bodies that I have read, are drafted with the idea of avoiding duplication of discussion-that is, having discussion overlap and run from one thing to another. The proper place to discuss the expenditures being made on the project concerned is the item in the estimates, which still has to be considered. This is not the proper place. When the item in my estimates comes up, all the facts will be available.


Hazen Robert Argue: I want to say a few words directly on the latter part of. this resolution, which reads:
-and to provide further that no projects involving an expenditure in excess of ten thousand dollars shall be undertaken without the consent of the governor in council.
If I correctly understood the minister's explanation, the limit now is $5,000. The Prairie Farm Rehabilitation Act has been very valuable in that it has provided for the construction of dugouts, small and large pasture projects, stock watering dams, and so on; and I would imagine that projects under $10,000 might account for most of the vote under that act. Would the minister say what proportion of the expenditures under this act is used for those very valuable small projects, which can be allocated and gone ahead with under this provision?

Just on that point, I note that the expenditures for prairie farm rehabilitation this year are down from $3,750,000 to $3 million. Since I believe these small projects are most valuable, I view with some concern a reduction of $750,000 in the amount provided under this act, most of which, I presume, will be devoted to these smaller projects. I would ask the minister to tell the committee what proportion of the money expended under this act goes for projects costing less than $10,000, and how many projects and what projects he expects to go ahead with this year. I would also ask what moneys are now being paid to the farmers for the construction of small dugouts. I believe the ceiling used to be $125. What is the amount of money that the farmer can receive for the construction of a small dugout? I hope that amount can be increased.


James Garfield Gardiner: I am afraid, Mr. Chairman, that we are getting off into the same thing again. All of these facts come before us when we are discussing our estimates, and they will all be here. The point which is involved in this particular item is one which I am sure the hon. member for Assiniboia will agree is absolutely essential to the carrying on of the act as it is now drafted. Without going into the question of detail with regard to the proportionate amounts, when you look at the divisions in the estimates themselves it will be noted that while the small projects that are referred to, such as dugouts and so on, run into the thousands, the amount of money which is expended on them is the smaller part of the expenditure. From that fact some people argue that all the money should be spent on that kind of thing because it does more good to more people. But the objective of this provision is to make it possible to get on with the work.
The cost, of doing a small job-such as the putting in of a small dam or the putting in of pastures-is almost double what it was in 1935. If you start to hold up projects costing between $5,000 and $10,000 until a council meeting is held, and the matter is passed by treasury board and by council, at least two or three weeks would elapse, or maybe a month; and on occasion two or three months might go by before you could get the matter considered. On matters of that kind the minister must have the right to pass upon the question within some amount, and the amount in the past in all of the departments has been $5,000. The amount is being raised from $5,000 to $10,000 in all similar departments. Because of the reason it is being raised in other departments, it is considered just as essential that it be raised in this one. The benefits flowing from this provision are going to accrue from

the fact that you can get work started, say, on May 1 instead of on July 1, with the result that you can spend your money during the summer.
One of the most difficult things to do in western Canada is to get to work early in our short summers. We have only a six-months period within which to do this kind of work. When there is frost in it you cannot move earth to put in dams. If you do, your dam will mush in the spring and it will go out. In our section of the country you must move in a short period of time the earth to build dams. If, on a small $7,000 or $8,000 dam, you lose half of the time in getting it through all the red tape that you must go through where hundreds of thousands are spent, you will not get any of that work done during that summer; you will have to carry it over until the next one.
That is the reason for this provision, and there is no other reason. It is to get these works, which are essential to the carrying out of the whole program, proceeded with more rapidly than they could be proceeded with otherwise. It is just raising the amount from $5,000, which was considered reasonable in all departments back in 1935, up to $10,000, which is considered reasonable in all departments now.


Hazen Robert Argue: I am not objecting to this
change that will be brought about by the resolution and the bill when it is passed. Can the minister tell the committee, from the experience he has had over the last year or two, approximately, how many projects would come into the $5,000 or $10,000 class? How many projects is this provision likely to affect in a year? Will it affect one, one hundred, or two hundred? What will be the practical effect of the passing of this resolution?


James Garfield Gardiner: I would be greatly surprised if it comes up to one hundred. I should not like to make guesses, because I can give the exact information when we get into the estimates. I think it will be found that it is not an unreasonable thing. It would not be provided for in all other departments if it were unreasonable; and if it is reasonable there, it is just as reasonable to have it here.


Stanley Howard Knowles: For the purpose of information, may I ask the minster a question on what he has just said? I understood him to say that one of the reasons for raising this amount was the time which it takes to get these matters through council. He also made reference to the treasury board. May I ask the minister whether, when this resolution and the bill pass, it will mean that projects 80709-2571
Prairie Farm Rehabilitation Act under $10,000 do not even have to be submitted to treasury board? Or do they still have to go there?


James Garfield Gardiner: They go to treasury board, yes. The projects will go to treasury board on the minister's recommendation. But they do not have to go through the regular procedure of going through council.


Stanley Howard Knowles: But they have to be approved by the treasury board?


James Garfield Gardiner: They are submitted there for the purpose of determining whether there is money available, whether it is within the regulations, and so on.


Major James William Coldwell: But the decision in that event rests with the minister, as long as the appropriation is there?


James Garfield Gardiner: Yes.


Major James William Coldwell: I think we are quite right in inquiring into this matter at this stage, because this measure, if passed, will enable the minister to deal with projects under $10,000 in the way in which they are dealt with now under $5,000. That is why we are asking these questions, and I think we should be set right about the matter.


James Garfield Gardiner: That is exactly the situation.


Mr. Charlton:: This bill has particular
reference to the Palliser triangle, and the resolution particularly states that it is to provide for the appointment and superannuation of certain officers and employees. It has been stated that certain work has been done outside of the Palliser triangle. Can the minister tell us how many more employees, for instance, would have to be appointed than have been appointed in the past, in order to take care of work outside the Palliser triangle, and how much of this work outside of that triangle or in various other parts of the country has to do with the extra $5,000, for instance, that the minister may spend without going before the governor in council?


James Garfield Gardiner: Practically all the projects, if they became projects outside of the Prairie Farm Rehabilitation Act, would not come under this provision at all. Projects outside of the P. F. R. A. are provided for under those separate votes that are found in my specials; that is, we put up $200,000 on one thing, $300,000 on another, and so on. The investigational work in connection with those projects is usually done by the engineers under P.F.R.A., and it is only their salaries that are charged up in connection with it. This has nothing to do with that. If we go outside to do these works, they come under the other votes, not under this one at all, and they would be considered from that point of view.

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All these projects that I can recall at the moment are more than $10,000. They are tor much larger amounts. The only one that has been done in the section of the country that my hon. friend comes from is the one having to do with the diking of the marshes along lake Erie, where, along with the provincial government, we put in $100,000. Projects of this kind would not come under this $10,000 at all.


John Alpheus Charlton: The wages of the employees would not be apportioned out with the various outside jobs; they are all paid under this act?


James Garfield Gardiner: Yes.


John Alpheus Charlton: The wages portion of the work does not change that; they will be paid in the ordinary way.


James Garfield Gardiner: Yes.


John Alpheus Charlton: I want to point out that as the work progresses outside the area there is much more reason why it should be made applicable to the whole of Canada.


Major James William Coldwell: The bill, as it comes down, will provide that certain classes of employees will come under civil service superannuation. I am not going to ask the minister what these classes will be, because I presume the bill will indicate it and the minister will discuss it. I hope that, when the bill is drawn, as many as possible of the employees of the Prairie Farm Rehabilitation Act will come under the civil service and superannuation, in the interests of both the Prairie Farm Rehabilitation Act and the employees themselves. It is important that as many of these officials as possible shall be permanent employees entitled to proper increases in salary and to superannuation. I should like to see the minister include as many of these classes of employees as it is possible to do.
Resolution reported, read the second time and concurred in.
Mr. Gardiner thereupon moved for leave to introduce Bill No. 375, to amend the Prairie Farm Rehabilitation Act.
Motion agreed to and bill read the first time.



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James Garfield Gardiner: the second reading of Bill No. 357, to amend the Criminal Code <race meetings).


Edmund Davie Fulton: Will the minister make an explanation, or say whether the whole bill

is covered by the explanatory note, which does appear to give a fairly complete picture?


James Garfield Gardiner: The whole bill is covered by the explanatory note. The bill itself was introduced in the Senate and fully discussed there. If I were permitted to do so, I might read just one or two sentences from the words used by the hon. senator who introduced the bill in that house. I know I may be a little out of order, but-


James MacKerras Macdonnell: You certainly are.


Edmund Davie Fulton: With unanimous consent.


Mr. Speaker:: Order. I doubt whether with unanimous consent a debate which took place in the present session in the Senate should be referred to in this house.


James Garfield Gardiner: I wij.1 say it without reading it.


Edmund Davie Fulton: Paraphrase it.


James Garfield Gardiner: The Department of Agriculture received a request from the Standard Bred Horses Society and the Canadian Trotting Association to consider providing for the same kind of supervision of pari-mutuel betting where trotters and pacers were the horses which were competing as now exists in connection with running races. The obvious reason for this request is that it gives more protection to the public that is betting on races. The law generally states that betting is illegal; then it goes on to say that there are certain exceptions, and the exceptions are set out in the particular section that is being amended.
The exceptions provide that where races are being run under pari-mutuels, a certain percentage of the take from the public can be utilized by those who are promoting the races-in this case it is nine per cent. Then it is provided that a certain percentage may be taken by the provinces in the way of taxation, and a certain percentage must go to the public. The purpose of the supervision which this department exercises is to see that the public gets its share. That has been the case in connection with running races, and it has been suggested that it should be the case in connection with trotting. Trotting and pacing races are coming back. It is developing into rather big business. It was suggested that the same kind of supervision ought to be put on the one as on the other.
The whole intent of this amendment is to bring the trotters and pacers under the same supervision when pari-mutuel betting is carried on in connection with the racing. The procedure which is followed in bringing about the supervision is for the association which

is concerned to apply for the supervision by representatives of this department. The fact that they have that supervision makes that kind of betting entirely legal; and protection is given to the public to the end that sufficient money will remain in the pool that is divided up among those who are betting on races to give the public a fair deal.
The whole intention is to put the racers and pacers under the same regulation as the runners. All that was submitted to the Department of Justice is just what is in the statement of the intent of the measure as it appears on page 2 of the bill. They concluded that the best way to do it was to repeal the section and rewrite it, rather than just to say that wherever certain terms appear, other terms are to apply. To have that kind of legislation they just repealed the section and rewrote it. The only new provisions are those which provide what we consider the means necessary to place exactly the same kind of supervision on pacers and trotters as we now have on runners.


[Stage Direction]
Motion agreed to, bill read the second time and the house went into committee thereon, Mr. Dion in the chair.
On section 1-Exceptions.
Stanley Howard Knowles: Usually when bills are
worded in such a way as to carry forward existing legislation, with the exception of certain precise changes, those changes are underlined in the printed copy of the bill placed before us. There seems to be no underlining in this bill. I take it from what the minister has said that if that were done it would simply be a case of underlining references to trotters and pacers; is that so? I realize that I am not too sure of what I am talking about in connection with this subject of racing.


James Garfield Gardiner: As a matter of fact, that ran through my mind when I first saw the bill. I have been accustomed, as all hon. members have, to the underlining of changes. The explanation given me, which is obviously the proper explanation, was that this whole thing is the section written over again. By subsection 1 in the bill we wipe out subsections 2, 2(a), 2(b) and 3 of section 235 of the Criminal Code, chapter 36 of the Revised Statutes of Canada. Those sections are repealed, and other sections, as set out in the bill, are substituted therefor. Then we have written what to all intents and purposes is a new section.
There is no place at which we can underline the language and say that it is just changed. The same things have been written into a new section. I am told the reason for this is that this legislation was built up over
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the years and it was somewhat difficult to interpret the phraseology which had been written into it from time to time by different persons. The Department of Justice thought it best to rewrite into the bill exactly the same meaning as was in the language of the old act. They tell me that has been done, and our own officials who are familiar with the matter say that it has been done.
The chief change appears in subsection (2) (d), at the bottom of the second page of the bill. That is the chief consideration that was given in the matter. I do not believe the committee would run into any difficulty if it were to pass these early sections and accept what I have said as the fact, namely, that they are the same as they were in the old act. We are not changing it. When we come down to including the pacers and trotters, we try to put them on the same basis as the runners.


Stanley Howard Knowles: The minister suggests that there is no difficulty about passing the early sections. I would draw his attention to the fact that there is only one section in the bill, and that when that section is passed, that is all there is to it.
There are one or two points which I would bring to the attention of the minister, in the hope that he would clear them up. First, I have always thought that the Criminal Code came under the Department of Justice. In the present instance, however, the Minister of Agriculture is bringing in a bill to amend the Criminal Code. I could understand some other ministers getting out of their departments, but why should the Minister of Agriculture do that?
Then, the minister began to refer, before Mr. Speaker stopped him, to what was said in the other place. I do not wish to have the minister break the rule in that respect, but I would ask him what senator introduced the measure in the other place. I believe I am in order in asking that question. Did he do it on behalf of the government? Why did it come in through the Senate, rather than being introduced in the House of Commons?


James Garfield Gardiner: Referring first to the last question, it is a matter of knowledge that it is rather difficult to keep the Senate moving along continuously with its work in the early part of the session, if everything is submitted first to this house.


Stanley Howard Knowles: They have their divorces.


James Garfield Gardiner: And there are some other people who have had divorces to deal with, too. This measure, along with a number of others, was sent to the Senate for the purpose of making some work available there. It was thought it was a matter which might

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properly be dealt with in the Senate. As a matter of fact, on the last three or four occasions on which the Criminal Code has been amended, such amendments have originated in the Senate. The reason has been, the one I have just stated, namely, that it was possible to have the matter dealt with in the Senate before it came to this house. Discussions that take place there are known to members here. Hon. members may follow them, if they so desire-and I know many have done that. Then when the matter comes to the House of Commons, having been dealt with in the Senate, procedure is facilitated here. That is the only reason for its having been introduced in the other place.
It was Senator Hayden who introduced the measure in the other place, and who has introduced other measures.


Stanley Howard Knowles: But he did it on behalf of the government, did he?


James Garfield Gardiner: He did it on behalf of the government-I presume at the request of the government leader in the Senate, who usually arranges those matters.


Stanley Howard Knowles: But the fact that the minister is dealing with it here makes it clear that it is a government bill.


James Garfield Gardiner: Yes. Then the other question was as to why it was in the name of the Minister of Agriculture in this house. Well, I suppose it is not enough to say that it has always been the Minister of Agriculture- but it has. The reason is that those who put up a real argument in favour of racing are those who are interested in the breeding of driving and running horses. It has always been considered the responsibility of the Department of Agriculture to promote the breeding and production of livestock, which includes horses. One may ask: Why would this be necessary, in these days of motorcars? Well, all I have to say in that regard is that about the only kind of horse that must still be bred on a farm, in a country as far north as Canada, is the type of horse that can move on the road in the wintertime.
In my experience, the best horse to put on the road in the winter is the horse which has enough standard-bred breeding to give him speed, and enough of some other breeding-* perhaps hackney, Irish jumper, bronco, or something else-to give him a little more weight. In that way you have a horse with enough strength to take a sleigh through the snow in the wintertime, and enough speed to get to town before you are frozen to death. That is the type of horse in which we are most interested.
I believe that is the reason why trotting and pacing races are becoming more popular 
than they were ten or twenty years ago. The idea is to promote interest in the horse; and because that is the idea, this department is asked to take care of it.


Stanley Howard Knowles: The only comment I would make is that as I look over the bill, rather than its being a bill for the promoting of the breeding of horses, it seems to me that it is a bill for the promoting of betting.


Mr. Fair:: That is because there is so much gamble in farming that it has been felt that horse racing is a gamble, and that it should be put under the Department of Agriculture.


James MacKerras Macdonnell: I am sure the Minister of Agriculture is competent in many ways. However, this bill seems to require a competence of knowledge in the mysteries of the pari-mutuel system. Can the minister discharge the duty laid down in subsection 5, which states:
The Minister of Agriculture, if he is not satisfied that a proper proportion of gate receipts and percentages taken from the pari-mutuel pools is being given in purses to horses taking part in the race meeting or that the provisions of this section are being carried out in good faith by the association conducting the race meeting, may at any time order the betting to be stopped for such time as he may think fit.
He may not order the racing, but he may order the betting to be stopped.


James Garfield Gardiner: That is right; but we are still considering section 1.


Stanley Howard Knowles: No; section 1 is the whole bill.


James Garfield Gardiner: Yes, but when we take the subsections seriatim we will get to that point. Nevertheless I am quite prepared to deal with the matter. There is nothing in this bill that stops anyone from running a horse race; if there is no betting, you can run all the races you like. If it is just a matter of having a horse race at a country fair or anywhere else, they can run just as many races as they like. What the Criminal Code has always said is that if you are going to bet, then you must do it in a certain way. What is provided here is that if our man who is there checking on everything that is being done with the funds, and who has access to everything carried on in connection with the pari-mutuel betting, finds that somebody is taking more money out than he ought to be taking out, he can stop the betting. The race can go on; the public can watch the race going on, but there will be no money bet. Under pari-mutuel he simply closes the wickets and says: You cannot sell any more tickets until you do what we are instructing you to do.


Edmund Davie Fulton: There is one question I should like to ask with respect to subsection 6. I accept all the other explanations, but . I should like assurance from the minister that he is given no new powers under subsection 6.


Jean-François Pouliot: Mr. Chairman, before this section is carried I should like to say something on this bill, and my remarks will not be at all reproachful of the Minister of Agriculture.


Robert Fair: Are you going to place a bet?


Jean-François Pouliot: No, not with my hon. friend, because he would not take it. My remarks will be very simple, and will not be at all a reflection on the minister who is sponsoring the bill.
This is an example of badly drafted legislation. Only those who are experts in parimutuel matters can understand this kind of half-baked legislation. A distinction is made between associations incorporated before May 19, 1947, if:
(A)	such association has conducted a race meeting with pari-mutuel betting under the supervision of an officer appointed by the Minister of Agriculture at any time after the 1st day of January, 1938, but before the 19th day of May, 1947, or
(B)	The Minister of Agriculture has, before the 19th day of May, 1947, made a determination under this section that the provisions of subsection 1 of this section, section 227 and subsections 1 and 2 of section 229 shall not extend to the operation of a pari-mutuel system with respect to running races at a race meeting conducted by such association on a race course of another association.


Stanley Howard Knowles: Everybody who places a bet should be required to understand that first. That would certainly limit betting.


Jean-François Pouliot: Horse racing is a kingly sport. Most of those who own horses in Canada, the principal winners at the races, are multimillionaires. Some of them are just pure hypocrites. They may have some interest in paper mills that work at full capacity on Sundays in Ontario, for the seven days in the week, but when it comes to horse racing they object to having horses run on Sundays.
It is different in the province of Quebec. The paper mills are closed on Sundays, but the farmers and others enjoy horse races on Sundays as a legitimate distraction. There is nothing wrong with it, and it cannot be an offence except in virtue of this law. In the province of Quebec, the young people are baptized on Sundays, and I understand that in Ontario funerals take place on Sunday. Those are the differences.


James MacKerras Macdonnell: Baptisms
take place on Sunday in Ontario.


Jean-François Pouliot: Not to my knowledge, but I do not live all of the year in Ontario. This
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is outside the range of the bill. What I want to say is that if these millionaires were less hypocritical they would not insist on such legislation as this. They are Sunday observers behind the curtains. Let us be frank about it and admit that there is nothing wrong in farmers and country people attending horse races on Sundays. I hope this will be considered.


Mr. Johnston:: What about betting on Sunday?


Jean-François Pouliot: Does my friend consider it an offence? He will be starting a new theology.


Charles Edward Johnston: I am asking you.


Jean-François Pouliot: I am not opposed to it, and I cannot say whether or not it is a sin, because I am not a theologian. I do not think there is anything wrong in it.


Charles Edward Johnston: Betting on Sunday?


Jean-François Pouliot: Yes. It may offend my hon. friend's principles; he may have his views and he is entitled to them, as is anybody else, but I do not find anything wrong with it. Some people may think differently, and that is their business. I am not saying anything unpleasant about them because they do not share my view. They are free to think what they like about it.


Charles Edward Johnston: Just another form of gambling, that is all.


Jean-François Pouliot: I have submitted the matter to the committee. I am against ultra-puritanism in all its forms.


Edmund Davie Fulton: Has the minister had an opportunity of considering whether subsection 6 grants any new powers?


James Garfield Gardiner: It does not give any new powers, except that it will apply to trotters and racers as well.


Mr. Proudfoot:: Mr. Chairman, this amendment has been asked for by the standard bred breeders of Canada because in certain instances races have been promoted by men over whom we have no control, nor have we any control over the betting. So we asked the Department of Agriculture to supervise our standard bred races similarly to the supervision that has been given to thoroughbred races. I do not see anything wrong with the bill, except in one instance, and I would refer to paragraph (d) (ii) which reads:
No more than eight races or dashes, or ten heats shall be held during any twenty-four hour period.
I do not think that is quite correct, because we generally race three heats, and three will not divide into ten. That is the only thing I can see wrong with the bill, and I would

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ask that it be changed to twelve rather than ten, which is not a multiple of three. As I say, this bill was requested by the standard bred breeders, and also by the Canadian Trotting Association.


Mr. Ferguson:: We cannot control the
liquor situation properly without the aid of the government, and we cannot control betting on horse racing in Canada without the aid of the government. In my opinion the bill has been introduced to give the same form of control as is provided for the authorities who control liquor, which cannot be controlled otherwise. We have tried it. It is within the power of the government to control horse racing properly. It has nothing to do with paper mills, millionaires, the mill rate in municipal taxes, or any kind of mill at all. In my opinion it is simply proper and sane legislation.


Mr. Lesage:: I agree completely with
what the hon. member for Pontiac-Timiska-ming has said. In my part of the country we have sulky races, and usually there are four races with three heats each. I wonder if the Minister of Agriculture could not find it possible to change the figure from ten, as set forth in the bill, to twelve. That is the only complaint I have, and it would not make much difference.


James Garfield Gardiner: A number of members,
who are much more familiar with the conduct of horse racing in different parts of the country than I am, have made similar representations since the bill appeared on the order paper. I feel that it would not be possible for me to agree to increasing the figure from ten to twelve without first discussing it fully, not only with the officials but also with my colleagues. The reason is that we have given a general undertaking to the house, and the undertaking was given in another place, that the bill does not provide for any further opportunities in connection with betting than existed before; in other words, that there are the same opportunities for betting on trotters and pacers as there are for betting on runners.
I realize of course that trotting races are run in three heats, and the general impression I had was that if you said what is being suggested should be said, you might confine it to nine heats. I am told, however, that the way in which racing is carried on in certain sections of the country, particularly in the Ottawa valley and outside the Ottawa valley in Ontario, is that the race is actually put up for bids, and the final racing is carried on at some other fair which bid for it. That type of race could not be conducted except with the possibility of +/*n heats. 
The reason why it is ten instead of nine is that that kind of racing is established. They race their three year olds at a certain fair, and then the race is finally run off somewhere else. The fairs bid for the right to have the race run there, and the fair that bids the highest has that race. They do the same thing with two year olds. The race is run off, and in order to run it off at the final fair they must provide for ten heats. If both two year olds and three year olds happen to be running off at the same fair, they would require ten heats. The bill makes provision for that, and the suggestion is now made that it should be twelve heats.
I am in the hands of the committee. This is your bill now; it is not mine. It has been our opinion that ten heats provide as much in the way of opportunity to bet as is provided now for the runners in eight races, and that there would be an argument on that count against having it more than ten. At the same time, however, there are a great many racing events from one end of Canada to the other where they have four races of three heats each, and that is twelve heats, not ten. I am quite prepared to allow the subsection to stand and bring it back later. I am prepared to have the committee rise and report progress, or if the committee thinks it should go through as it is, I am quite prepared to accept that.


Some hon. Members:: No.


Edmund Davie Fulton: Let it go through and change it next year.


Stanley Howard Knowles: May I ask the minister
whether the purpose of the limitation in the bill as it now stands is to prevent additional betting, or is it to protect the horses?


James Garfield Gardiner: As has been said by the hon. member for Pontiac-Timiskaming, the object is to protect people who buy tickets at races where pari-mutuel betting is carried on. The practice is for a person to go up to the wicket and buy a ticket. The other type of betting is bookmaking. The individual goes up and makes his bet, and he knows when he makes it what he is going to get out of it if he wins. That is all put down in black and white. He can do that kind of betting, and it does not come under this at all. We do not supervise that kind of betting, because it is an agreement between the individual and the bookmaker at the fair where betting is being legally carried on. However, in order to make it easier to handle it on a much larger scale, they have started parimutuel betting. You go up to the wicket and buy a ticket, and then your money goes into a pool, together with the money of all the others who bet.


Stanley Howard Knowles: Not mine.


James Garfield Gardiner: I am telling you how you
can do it if you want to at any time.


An hon. Member:: He only bets on sure things.


James Garfield Gardiner: The money goes into a pool. This law says that those who are conducting the racing cannot take out more than nine per cent if the amount going into the pool is $20,000 or less, and seven per cent, six per cent, five per cent, and so on as the betting increases. They cannot take any -more than that out. Then it says that the public must get a certain amount. There is a leeway in between where the provinces take something by way of taxation. During the war we took it, and at the end of the war we amended the act again to turn it back to the provinces. The provinces can take it if they wish to do so. In some places they do, and in others they do not. We simply put a man there to check on all the money that goes into the pool, and then we check on the way in which it is disposed of. So long as the public get their share divided among those who win, we are satisfied; if they do not, we stop the betting. What we are suggesting is that we are going to apply that to another type of racing. The regulations were imposed in the first place to limit betting to what I have been describing. As the situation is today, betting can take place on trotters and pacers throughout the country without any supervision or regulation at all.


Mr. McLure:: Not in all provinces.


James Garfield Gardiner: Except what the provinces may carry on. A check is not made as it is with runners. These people say that they want the same check, and all we say is that in drafting the terms of the act we do not want to give those racing trotters and pacers any advantage over the runners; otherwise the racing runners will simply come back and ask for the same advantage, and we will have the one bidding against the other. What I would like to check up before agreeing to twelve heats is that we are not giving any such advantage, which would run us into difficulties all along the line. I have a feeling, without checking it, that we would be, though I am not absolutely convinced of it.
I have placed all the facts before the committee. If the committee thinks this restriction is required, that is quite satisfactory to us. If they think we should check further and make sure of it, I am prepared to do so and allow the bill to stand until -later.


Mr. Riley:: I would- agree with the hon. member for Pontiac and the hon. member for Montmagny-L,'Islet. All through the maritime provinces harness racing has been a
Criminal Code
major sport for generations. At many of our tracks they run four races of three heats each. Even if they do not do that every day, they may be rained out one day and spread the card for that day over the next few days, and thus run four races daily of three heats each. The danger we see is that we have the controlled pari-mutuel system of betting, and if this restriction is placed on the races held it will tend to encourage bookmaking at many tracks in the maritimes. If the public is not permitted to bet at the wickets under the controlled pari-mutuel system, there is the great danger of bookmakers coming in and establishing that vicious practice which flourishes in other parts of the country. We have no bookmaking today in the maritime provinces, and we do not want it; but there is the grave danger that if the ten-heat restriction is placed on pari-mutuel betting at our tracks, we may very well be faced with this problem. I hope the minister will bear that in mind when considering this section.


Jean Lesage: In view of what the minister has said-, I move that the committee rise, report progress and ask leave to sit again this day.


James Garfield Gardiner: Would the hon. member agree that we consider the remainder of the bill as passed and allow subsection (2)(d) to stand for further consideration? Then the committee might report progress and I will bring the bill in later.


Jean Lesage: I agree.


Mr. Pearkes:: Can the minister give an assurance that this bill will be brought back this session and not left over until another session?


James Garfield Gardiner: It will be brought in just as soon as the Minister of Public Works can give me the time.
Section stands.
Motion (Mr. Lesage) agreed to.
Progress reported.



CANADIAN NATIONAL RAILWAYS


Lionel Chevrier: that the house go into committee to consider the following resolution:
That it is expedient to introduce a measure conferring authority upon the governor in council to authorize the Canadian National Railway Company to construct a line of railway from Sherridon to Lynn Lake, in the province of Manitoba, a distance of approximately 155 miles at an estimated expenditure of $14,725,000 and an average expenditure of $95,000 per mile. The measure will make provision

Canadian National Railways for the Issue by the company of securities, which may be guaranteed by the government in respect of the cost of construction. To enable the company to proceed with construction forthwith temporary loans may be made the company out of the consolidated revenue fund, upon, terms and conditions prescribed by the governor in council and secured by company securities.


Mr. Green:: Will the minister make a statement, either at this stage or when we are in committee?


Lionel Chevrier: I was hoping I could make it in committee of the whole.
Motion agreed to and the house went into committee, Mr. Dion in the chair.


Lionel Chevrier: This resolution seeks to authorize the Canadian National Railways to construct a line of railway from Sherridon to Lynn lake, in the province of Manitoba, a distance of 155 miles, at an estimated expenditure of $14,725,000 and an average expenditure of $95,000 per mile.
The resolution may be divided into three parts: First, that which seeks the authority to construct the line; second, that seeking authority so far as the Canadian National Railways is concerned, to issue securities guaranteed by the government to finance the construction.; and third, that seeking authority to make temporary loans to the Canadian National Railways pending the construction of the line.
The matter of the construction of this railway has been under consideration for some time. Recently discussions were initiated between the officers of the Canadian National Railways, Sherritt Gordon Mines Limited and the Minister of Defence Production, and an agreement was reached.
The economics of the proposal so far as the Canadian National Railways is concerned are based on the understanding that the Canadian National Railways would, ini the first instance, assume $10 million of the cost of construction of the said line, the balance of the cost to be borne by the federal government through the Department of Defence Production. Sherritt Gordon Mines Limited would contribute $5 million of the cost, payable at the rate of $350,000 annually for a period of twenty years, with the proviso that when traffic over the line proves to be greater than the traffic now estimated, that is, 1,880,000 tons of outbound traffic, the Canadian National Railways would repay Sherritt Gordon Mines Limited $2.65 per ton until a total of $5 million had been paid'.
Minerals of a strategic nature have been discovered in the Lynn lake area. They are the property of Sherritt Gordon Mines Limited and they are needed for defence
[Mr. Chevrier. 1
production. They cannot be exploited without the construction of this railway line. The construction of the railway line would 'harve the following effect: First, Sherritt Gordon Mines Limited would be able to proceed with the full development of their Lynn lake nickel copper deposits, which have a proven reserve of 14 million tons; second, the establishment of a 2,000 tons per day mining plant and concentrator at Lynn lake; third, the establishment of a nickel refinery at Edmonton on the Canadian National Railways line for the refining of the nickel concentrate from Lynn lake and the manufacture as a by-product of ammonium sulphate; fourth, the construction of a 7,000 horsepower hydro-electric plant on the Laurie river, with an ultimate potential of 15,000 horsepower; fifth, the additional production per annum, providing the present demand for base metals continues, of the
following:
tons
Nickel	 8,407
Copper	 3,414
Cobalt	 100
Copper sulphide	 1,545
Ammonium	sulphate	 72,000
It is estimated that the annual value of the mineral and ammonium sulphate production would be of the order of $14,000,000.
The successful operation of this railway branch is dependent upon the mining development in the area. The Canadian National Railways estimates that with the traffic available and the survey it has made of the traffic potential when the developments referred to above have been completed, the effect on the net income position of the Canadian National Railways will be $244,000 annually. The contribution from Sherritt Gordon Mines Limited of $350,000 per year for twenty years would raise this figure to $594,000 per year. The excess over the $10,000,000 for which authority is being sought by the Canadian National Railways will be financed by the Department of Defence Production. It is estimated this will amount to $4,725,000.
The Canadian National Railways will be authorized to issue securities guaranteed by the government not exceeding $10,000,000, and temporary loans will be authorized during the period of construction.
' This is a project of great magnitude. It is one which is urgently required. It will mean the expenditure of $50 million by Sherritt Gordon Mines Limited, the Canadian National Railways and the government. It will mean the full development at Lynn lake of 14,000,000 tons of nickel copper deposits; the establishment of a mining plant and concentrator employing 500 men; the establishment of a modern townsite at Lynn lake

capable of housing 2,500 persons; the establishment of a refinery at Edmonton employing approximately 100 men, and the additional production of strategic base metals.
I recommend this resolution to the house.


An hon. Member:: Another Flin Flon.


Joseph-Alfred Dion: Shall the resolution carry?


Howard Charles Green: It is one o'clock, Mr. Chairman. This seems to be an extremely important development. Perhaps we could consider it after the luncheon recess.
At one o'clock the -committee took recess.
The committee resumed at three o'clock.


Howard Charles Green: There are just one or two questions I should like to place before the Minister of Transport. If I heard his statement correctly this morning, there are to be three strategic minerals produced by this mine at Lynn lake, namely, nickel, copper and cobalt. I understand also that there is to be a mill at the mine so that the ore produced will be turned into the form of concentrates. Can the minister tell us where the respective concentrates are to be refined, and also give us some idea of the reserves of ore that are available in the district?
I have one other question which has to do with settlements along the route of this 155 mile line. Is there farming country or timber country, or are there any other mines on the line? Finally, is it the intention to refer the bill to one of the committees of the house for consideration, either the special committee on government-owned railways and shipping, or the standing committee on railways, canals and telegraph lines? I presume a bill of this kind would go to the first mentioned committee, but I think it would be advisable to have it referred to one or the other of these committees so that witnesses could be heard and some further study given to the whole proposal.


Lionel Chevrier: Dealing with the last question first, when we reach second reading of the bill it is my intention to move that it be referred to the standing committee on railways, canals and telegraph lines for study. It might be possible, if it was the wish of the committee, to hear evidence from certain of the officials of the railway company who could speak on the economics of the project.


Howard Charles Green: Could there also be evidence from the mining company?


Lionel Chevrier: That could be given consideration, but I think that the officers of the Canadian National Railways, through their
Canadian National Railways engineers and inspectors, will have all the information available. I shall be glad, however, to see what can be done.


Stanley Howard Knowles: Would it not be better to send it to the committee on railways and shipping owned, operated and controlled by the government?


Lionel Chevrier: Railway bills have always been sent to the committee on railways, canals and telegraph lines, and it would be my hope that the house would see fit to send this bill to that committee. Railway bills, in my experience, have never gone to the other committee, which is one on government-owned shipping and matters affecting the Canadian National Railways.
In the topographical and geographical surveys that have been made of the area in which the railway will be built there is no indication of any agricultural development. It is all lakes and rugged territory, where farming would be almost impossible.
With reference to timber, there is no merchantable timber. There is some wood that could be sawn into logs, but no timber of any commercial value.
Answering the first question, the ore would be milled at the townsite of Lynn lake, where the mining plant and concentrate mill would be built. The nickel concentrates would be sent to the refinery in Edmonton, and the copper concentrates to the refinery which now exists at Flin Flon. The reserves so far proven are in the extent of 14 million tons.


Howard Charles Green: Is the refinery at Edmonton
to be run by natural gas?


Lionel Chevrier: That I could not say. It
will be -operated by Sherritt Gordon, and I presume that has entered info the cost.


Mr. Mclvor:: I think it is wise to send this bill to the committee on railways, canals and telegraph lines, because if there is anything wrong about it they will find out, and if there is anything good in it, it will come to light. It is one of the -most efficient committees in the House of Commons. I hope it will go there quickly, because otherwise it is only wasting time here.


Edmund Davie Fulton: Like anybody else, I guess I
can take a hint, and certainly most questions should be asked in the committee. I did not gather from the minister's statement whether the estimate of income to the railway of $240,000 annually was net income or gross income.


Lionel Chevrier: Net.


Edmund Davie Fulton: Has the minister any figure readily available for their estimate of gross return?

Canadian National Railways


Lionel Chevrier: Yes, I have complete detail of the position so far as the Canadian National Railway is concerned when this line will be built, but I should think that this is not the time to give it.


Edmund Davie Fulton: Give it in committee.


Stanley Howard Knowles: The hon. member for Fort
William is anxious to see the bill get to the committee. As a matter of fact we have not got the bill yet; this is just a resolution preceding the bill. However, I want to say that any move that is designed to develop the natural resources of this country, and to increase the production of real wealth, certainly deserves the favourable consideration of this house. I am glad to see that steps are being taken to facilitate the development of the real wealth that is latent in this part of northern Manitoba.
However, I cannot help but take note of the fact that when development such as this is contemplated we, the people, through the government, have to come into the picture in order to facilitate that development. It is perfectly true that private enterprise is going to play its part, for a well-known reason, too; but the minister has also made it clear that there is to be a considerable sum of public money put into the building of this railway in order to make possible the development of this very valuable resource.
I for one feel, Mr. Chairman, that in the years that lie ahead we are going to have to pay still more attention to developing the resources of this country. We are anxious to build as high a standard of living as possible. We cannot do it out of thin air; we have to do it out of real wealth, and we have the potentiality for producing that real wealth in this country to an unlimited extent.
It has been indicated that it is the necessity of defence production which is the immediate spur to this activity, and one accepts that fact. I would point out, however, that even in peacetime it is highly desirable to go ahead with the development of projects of this nature, but I feel they should be done in the interest of the country as a whole.
There are two or three questions I should like to ask, on the basis of what the minister said this morning. As I understood him, the government is putting in some $10 million and Sherritt Gordon $5 million. Those amounts are going into the construction of the railway. I understand the money Sherritt Gordon is putting in is to be paid at the rate of $350,000 over a period of twenty years- and I am a little puzzled with that, because it works out to a total of $7 million. Then 

I noticed the minister said that if the production exceeded a certain number of tons the money would be paid back to Sherritt Gordon at the rate of $2.65 per ton.
Does this mean that, in reality, the $5 million being put up by Sherritt Gordon toward the building of the railway is really just a loan, subject to Sherritt Gordon's actually producing a certain quantity of ore?
I have one or two further questions, but perhaps the minister would answer that one first.


Lionel Chevrier: Let me put it this way: the cost of this railway is estimated at $14,725,000. Then, $10 million of that will be financed by the Canadian National Railways in the following manner: $5 million of their own money, and $5 million which they will advance to Sherritt Gordon, who will in turn repay the Canadian National Railways at the rate of $350,000 a year for twenty years. This is on the condition that when the traffic over the line reaches an amount in excess of the amount mentioned in my statement this morning, that is an amount in excess of 1,880,000 tons, the Canadian National Railways will pay over and above that excess to Sherritt Gordon $2.65 a ton until the $5 million has been repaid.


Stanley Howard Knowles: In other words, in the end if Sherritt Gordon produces that much ore they will not be putting any actual dollars into the railway project itself?


Lionel Chevrier: No, that is not accurate. Sherritt Gordon are putting in $5 million, which they will repay the Canadian National Railways at the rate of $350,000.


Stanley Howard Knowles: Well, I will not pursue it further, except to point out that they are putting it in, but that they have the chance to get it back later.


An hon. Member:: Sure.


Stanley Howard Knowles: I hear various comments, one of them to the effect that this line should be built by the Canadian National Railways. All right; but that emphasizes what I said a moment ago, that it is perfectly clear that in order to facilitate the development of this natural resource it is necessary for the people of Canada, through their government, and through their government-owned railway, to finance the construction of the railway itself. This is another case of private enterprise with public assistance.
May I ask the minister whether in the agreement to which he referred this morning, the agreement that has been reached between Canadian National Railways and Sherritt Gordon-or it may be between the government and Sherritt Gordon-there are any

items or clauses relating to the freight rates to be charged Sherritt Gordon by the Canadian National Railways. For example, is there anything comparable-


Lionel Chevrier: None whatever.


Stanley Howard Knowles: Is there anything comparable with what is done in connection with Steep Rock?


Lionel Chevrier: No, no clause having to do with freight rates at all.


Stanley Howard Knowles: In other words Sherritt
Gordon will pay the standard tariff to the Canadian National Railways for that sort of freight.


Lionel Chevrier: I do wish the hon. member would not ask leading questions. He has asked me one question as to whether or not there is anything in this agreement in connection with the imposition of freight rates, and I have said no. That is clear. I think I made that clear. Now he comes along with a question, a leading question, in which he says, "I understand therefore that it will pay the standard freight rate." Well, my hon. friend can draw his own conclusion as to what they will pay. I do not know. First of all, the railway is not built. Secondly, the freight rate has not been fixed. Thirdly, the standard tariff has not been established on the new railway. Therefore it is impossible for me to answer that kind of question. I hope the hon. member will be satisfied.


Stanley Howard Knowles: But it is perfectly clear that there is no clause in the agreement similar to that in the Steep Rock agreement?


Lionel Chevrier: I have answered that twice by saying no.


Stanley Howard Knowles: Good.


Mr. Murray (Cariboo):: Obviously if the railway is not extended beyond Sherridon, that portion of the railway from the main line of the Hudson Bay railway at Sherritt junction to Sherridon would have very little business, and would have to be scrapped, since the mine at Sherridon is practically worked out. If this proposed construction program of the C.N.R. does not take place it means a ghost town at Sherridon, and a thousand men turned it of employment.
I would like to ask the minister if there is not a large hydroelectric power project which would be installed in order to operate this new mining development.


Lionel Chevrier: Yes. I indicated this morning that on the Laurie river, forty-five or fifty miles south of Lynn lake, there is a potential power development which will be capable of developing 15,000 horsepower of
Canadian National Railways electrical energy, which is more than sufficient to facilitate the production of the known deposits in the Lynn lake area.


George Matheson Murray: I understand a very great development is anticipated there by some of the other large companies, and that this power would be available for other mines developed in the area.


Lionel Chevrier: That I am not able to say, except that I do know other mining companies have made explorations in the area, and have certain rights. Whether they would use this power development or not, I cannot say.


James MacKerras Macdonnell: Replying to the hon. member for Winnipeg North Centre -and I thought, with something less than his usual charm-the minister said that the railway was not built, that various other things were not done and that therefore these figures could not be available. But there is one very important figure which is fixed, if I understand correctly, and that is the figure which Sherritt Gordon is to get back at a certain stage in the contract, at so much a ton. What puzzles me is how that figure was arrived at, if all the other figures are still unknown.


Lionel Chevrier: On the basis of the tonnage I gave this morning in my statement, concerning the additional production which would be available of nickel, copper, cobalt, copper sulphide, ammonium sulphate and the like, and on the basis of the amount of the value of these base metals, it can be estimated what the total revenue of the line would be. The Canadian National Railways have prepared a statement which I have before me, and which will be available at the opportune time, which shows that, having regard to that, their income position would be bettered by the construction of the line to the extent of $244,000 annually; and with the amount of $350,000 which will be paid annually by Sherritt Gordon to the company, over a period of twenty years, their income position would be bettered to the extent of $594,000.


James MacKerras Macdonnell: I am not on
the committee, and I shall not press the matter further, but I do wish to point out that I am still puzzled, because it would seem to me that these other figures which have been arrived at would depend, in large measure, on the freight rate on the ore during the period of operation. However, I am content to let the matter drop, and have it go to the committee.


Stanley Howard Knowles: In other words, if the minister knows that the position of the Canadian National Railways will be bettered to the extent of $244,000 per year, and if he knows

Income Tax Act
the weights of ore, upon which that $244,000 is based, someone must know what those freight rates are.
Resolution reported, read the second time and concurred in.
Mr. Chevrier thereupon moved for leave to introduce Bill No. 376, respecting the construction of a line of railway by Canadian National Railway Company from Sherridon to Lynn Lake, in the province of Manitoba.
Motion agreed to and bill read the first time.


Mr. Speaker:: When shall the bill be read a second time?


Lionel Chevrier: I have the bill in my hands and I am sure it will be distributed. I wonder if we could not give consideration to giving the bill second reading now so that it can be referred to the committee. There is great urgency for the construction of this line and it may be that the house would feel like considering the bill and' referring it to the committee.


Howard Charles Green: Much as I would like to help the minister along, we do have a responsibility to have a look at a bill before we pass it. I am afraid we will have to have second reading at the next sitting.



QUEBEC SAVINGS BANKS ACT


Douglas Charles Abbott: that the house go into committee to consider Bill No. 338, to amend the Quebec Savings Banks Act.


[Stage Direction]
Motion agreed to, bill considered in committee, reported, read the third time and passed.

[Stage Direction]
The house resumed, from Tuesday, June 5, consideration in committee of Bill No. 296, to amend the Income Tax Act-Mr. Abbott- Mr. Beaudoin in the chair.
On section 1-Income from office or employment.
James MacKerras Macdonnell: We were discussing depreciation under this section and the minister had told us that certain changes were being made in the regulations. I wonder whether the minister could indicate what line they will take or whether the situation is being changed?


Douglas Charles Abbott: I am afraid I am not in a position to indicate just what the amendments will consist of. As my hon. friend knows, the administration is handled primarily by 
the Department of Trade and Commerce so far as the issuance of certificates of eligibility is concerned, and the Department of National Revenue administers the balance of the regulations.
I have been informed that as a result of specific applications which have been made to the Department of Trade and Commerce and representations which have been received by that department and the Department of National Revenue, certain amendments to the initial regulations are being considered and I understand will be available shortly. It was felt that when changes were being made it should not be done piecemeal, that an endeavour should be made to do whatever seems desirable at the one time. I made inquiry this morning and was told that it was expected that the regulations would be available for consideration by council within a few days. I do not know that there is anything more that I can add to that.
I did indicate the other evening that I believed that one of the provisions in the regulations would be that there would be a periodical publication of the names of these >
who had received certificates of eligibility and the purposes for which the certificates had been granted. Apart from that I do not think that I can attempt to go into detail now, but I assure my hon. friend that as soon as the regulations are prepared they will be made available. I would doubt if the estimates of the Minister of Trade and Commerce will have been completed before that time, and if there were any questions which it was thought desirable to ask, they could be asked then.


James MacKerras Macdonnell: I appreciate the difficulty of the minister because this matter is in the hands of another department, but I wish he would go a little further and assure us that we will have an opportunity to discuss this important matter. I notice the estimates of the Department of Trade and Commerce are coming up tomorrow and from what the minister has said I gather that it may be several days, or perhaps a week or two before these regulations will be ready This is a matter of great importance and we ought to have a chance to consider it. I appreciate that we are dealing with regulations and I appreciate also this opportunity to discuss them, but I think the minister will agree that this matter is of sufficient importance that we should have a chance to discuss it again.


Douglas Charles Abbott: I cannot give any positive assurance that there will be a further opportunity, but I would hope that that would happen, I do not anticipate that the changes

in the regulations will be particularly drastic in their character. This matter has been before the house for some weeks and I think there would be a basis for discussion if my hon. friend is desirous of discussing it. While I would do my best to see that an opportunity is afforded, I could not give any such definite assurance. As the hon. member has pointed out, these are regulations. We have not before us any statutory provision relating to them and it is by arrangement, I think a most desirable one, that we are now discussing the general principle. I agree with my hon. friend that this is a most important matter.


James MacKerras Macdonnell: I thank the minister and I note his reservation. I think that makes it all the more incumbent upon us to bring to the minister's attention, while the regulations are still in course of being changed), any matters that we may have in mind. On April 10 the minister referred to this new and I suppose almost unprecedented provision, when he said:
What we need is a stiff financial deterrent that will affect particularly the businessman who is considering the kind of investment which is attractive, not because of its long-term soundness, but because it can be written off out of the expected high profits of the next few years at a time when he expects the rate of corporate income tax to be abnormally high.
I draw that to the minister's attention because I am going to suggest very earnestly that under the section as it is worded.-and I take it the whole thing is pursuant to the principle the minister laid down, and which I have just read-there are certain cases which seem to me not only to go far away from that but to be entirely contrary to it. No doubt the minister has had other representations of this kind, but I hope it will be possible in these regulations to deal with cases of the kind that I am going to mention.
I have one case here which I wish to draw to the minister's attention. It involves a situation where there was a holding company, and several subsidiary companies. The holding company retained ownership by simply retaining the shares of the various companies. For the past year or so a study has been in progress to determine whether substantial savings could be made by merging the projects into one enterprise. The study has been completed. It is obvious that the sensible thing from a business point of view is to merge, but if the merger is proceeded with no depreciation under this wording, as I understand it, will be available for four years. This is a case where no new equipment is involved. There is certainly no question of entering into a new investment with speculative possibilities. Yet under the wording as it stands, although
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decreased costs of operation could be achieved, the companies will be forced to carry on under the present set-up with higher costs, thus adding to the fires of inflation, you might say, because if they amalgamate now depreciation on the assets of the various constituent companies will be deferred.
The writer of the letter providing me with that information says somewhat caustically: "It simply does not make sense." I submit to the minister that whether or not it makes sense, it does not come anywhere within the four corners of the paragraph of the minister's speech that I read. I take it it is perfectly clear that this provision is not a tax collecting provision. It is a provision, as the minister has said, to avoid undue expansion. I think the minister will probably agree that it was never intended to catch a case of this kind, but it will, and numerous others. I submit to the minister that there must be some administrative way of dealing with this situation. Here is a case that by no conceivable stretch of the imagination comes within the minister's principle.
There are one or two other cases. I am sure they are known to the minister, but I want to get them on the record. There is the case-and I am sure there must be large numbers of such cases-where firm commitments have been made, commitments which cannot be escaped, to acquire property. They were made before the 10th of April but the machinery, or what you will, had not actually been acquired. Then there is the case of the individual businessman who wants to incorporate, and as I understand it he is in the same difficulty. I would have thought that in particular might have been made an exception because there is no question whatever there of coming within the minister's principle. I will leave the matter at that point merely emphasizing again that it seems to me that the cases I have cited have shown that the simple wording of the clause as it stands now is not only going to create great injustices but, what is perhaps even more important, it is going to create situations which I am sure the minister never had in his mind when he made his budget speech.


Douglas Charles Abbott: I think it is probably fair to say that special cases such as my hon. friend has outlined are just the sort of cases that are now under consideration to see whether some remedial action can be taken. I should add that as a rule representations are not made to me directly. They are made to the Department of Trade and Commerce or the Department of National Revenue. If the cases which my hon. friend has cited have not already been brought to the attention of the

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department-and I think some of them have -I shall see that they are carefully considered.


Mr. Fleming:: I am sure that the committee will appreciate the statement just made by the minister as to his willingness to review cases of this kind, because they are serious cases. I was a little disappointed to hear the minister say earlier this afternoon that the revision of order in council P.C. 1778 of April 10, 1951, which is under way at the present time, may not go as far as perhaps some of us had hoped. I should like to express an opinion based on what I have seen of the way in which this new order in council has operated.
For a sudden new departure in a matter of such importance, I think the order in council was unduly drastic in its terms. The hon. member for Greenwood has referred to its effects on various cases, and I also referred to such cases when speaking on this matter on June 5, cases where commitments had been entered into prior to April 10 but where the property had not yet been acquired, where the purchaser under his commitment is obliged to complete his purchase and discharge his commitment notwithstanding that he has no effective opportunity in a situation of that kind to exercise that choice which the minister praised in this new scheme as being the essence of it. I refer to the taxpayer's choice between acquiring and not acquiring property on which depreciation will be deferred four years. In a situation of that kind there is no element of choice left to the individual.
The feature of choice in the present scheme of deferred depreciation which the minister claimed for it is not to be found in a situation of that kind. The commitment is there, but there is no opportunity on the part of the purchaser to decide whether he will or will not acquire the particular asset which, if he acquires it, will not be depreciable for income tax purposes for four years. I would urge that the drastic features of the new depreciation scheme, its rigours, ought to be mitigated in the revision that is under review at the present time.


Douglas Charles Abbott: My hon. friend knows that one can always mitigate.


Donald Methuen Fleming: I hope that is the principle that will guide the government in connection with the present revision of the order in council. After all, when we think of the features of the scheme offered a few years ago to encourage people to embark on the acquisition and construction of plants, you will remember that the bonus or inducement there offered was double depreciation.
IMr. Abbott.]
If we were applying the same principle here in reverse, because of the fact that this is intended to have a deflationary effect, I should have thought that the step to be taken would have been to reduce the depreciation allowance by one-half. If with a view to expanding the construction of plant and equipment a few years ago the principle followed was to double the rate of depreciation, then surely the way in which that principle might well operate now would be to reduce the rate of depreciation by one-half, but this proposal eliminates it altogether, and in consequence it has some highly discriminatory features. It may be that in times like these, when great stress is being placed upon the need to halt the expansion of industries which may in any way compete for defence materials that are in short supply, brakes must be applied on both the extension of existing businesses and the creation of new ones. But, with respect, it seems to me that a measure so drastic as this, suddenly applied, is going to work very great hardship on young businesses, young enterprises and those avenues through which the free enterprise system finds its expression. People starting up in business, making their own way and taking all the risks inherent in entering upon a new business, find a scheme like this being applied with highly discriminatory effects.
I conclude these remarks by saying that I do hope the revision being currently carried out in order in council P.C. 1778 will not be merely some superficial amendment, but will really seek to eliminate the very objectionable features of the new scheme resulting from its rigour and the discriminatory consequences.


James MacKerras Macdonnell: 
Douglas Charles Abbott: All three are being considered.


James MacKerras Macdonnell: Then there is the question of the wording in section 1, where a new phraseology has been pointed out to me. Instead of the words "reasonable allowances" which I understand have been used in the past, we have a new phrase, "allowances (not in excess of reasonable amounts)". The suggestion is made that it is going to be confusing to have these different wordings. Perhaps the first question to ask the minister is whether they mean different things, because if they do that is another matter.


Douglas Charles Abbott: These amendments were
drafted by the Department of Justice, and I should not think there would be any serious confusion. It is to prevent abuse, of course, as my hon. friend appreciates, and any taxpayer who is dissatisfied would have the right of appeal. It would be a question of fact whether the allowances for travelling expenses came within the terms of those words and were in excess of reasonable amounts.


James MacKerras Macdonnell: But with his legal background I think the minister will agree that just as sure as shooting if that ever comes up for interpretation the first thing lawyers will say is, "Well, they used different words. They could not have meant the same thing, or they would have used the same words." Then presumably it would
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be easy for one side to suggest that these words are more restrictive, and for the other side to suggest that they are less restrictive. Does not the minister agree that it would be sensible to use the phrase which has been used in the past and which has the sanction of usage behind it?


Douglas Charles Abbott: I am told there is a reason for the distinction. I am afraid I had not given it the consideration my hon. friend has. The reasonable allowance phrase is found in section 5 (b). In that case the allowance in excess of what would be a reasonable allowance I suppose must be included as income and would be subject to tax. I really do not think it will give rise to any difficulty. This is intended to be a relieving provision, of course, because under the act as it now stands per diem travelling allowances are not allowed. It is felt that in all probability it is more economical to allow employees, such as civil servants and others, who are travelling to have a fixed allowance for travelling expenses, which obviously would be established on the basis of what it would reasonably cost them to live. If by any chance they were able to save a little on that I do not suppose anyone would question it.


Donald Methuen Fleming: I wonder if the minister would indicate in more complete detail the types of allowances contemplated in subsection 2 for agents-general of provinces while in Ottawa.


Douglas Charles Abbott: I understand that certain provinces maintain representatives here and that, as is the case with our diplomatic representatives abroad, in addition to their salaries and other remuneration they receive what is described as a representation allowance, I suppose to enable them to look after the expenses necessarily incurred when businessmen or others from their province are here on business. They act in a somewhat similar way to our trade commissioners and diplomatic representatives abroad. I believe they have been maintained here since the beginning of the last war, when many businessmen from the more remote parts of Canada were coming to Ottawa in connection with war business and it was found useful to have a provincial representative here to assist them in their discussions with government departments. Essentially it would be analogous to the representational allowances which I understand our diplomatic representatives and trade commissioners receive while abroad.


[Stage Direction]
Section agreed to.
[Stage Direction]
Income Tax Act
On section 2-Certain reserves included in computing income.
Donald Methuen Fleming: I believe two features of this section will attract attention and perhaps some opposition on the part of the house. In line 24 we have the expression "in the opinion of the Minister of Finance," and the second subsection makes these provisions retroactive. In general, when the Income Tax Act was enacted two years ago, parliament turned its face against ministerial discretion. There are several evidences in this bill of the conferring of discretion on the minister. I do not say that in every case there should be no ministerial discretion. There are some cases where it may be necessary, but I think that the committee will wish to scrutinize every such case with the utmost care. I would ask the minister if he would state to the committee what is the case that he makes out for the discretion in this instance.


Douglas Charles Abbott: My hon. friend may recall the proceedings before the banking and commerce committee at the time of the last revision of the Bank Act. I do not know whether he was in the house at that time or not.


Donald Methuen Fleming: No.


Douglas Charles Abbott: At that time there was a long discussion with regard to what are known as the banks' inner reserves or hidden reserves. As a result of that discussion it was decided that the Minister of Finance should have the responsibility of determining whether or not the so-called inner reserves of the bank were in excess of what were needed for banking purposes. My hon. friend will find in section 11(4), which is the section allowing deductions from income, a reference to this same subject, and the same phrasing:
. . . such amount as is set aside or reserved for the year either by way of write-down of the value of assets . . . and is, in the opinion of the Minister of Finance, having regard to all the circumstances, not in excess of the reasonable requirements of the bank.
This is a complementary provision to provide that if the Minister of Finance is of the opinion that these inner reserves are in excess of the requirements of the banks, he may require that they be taken back into income for purposes of tax.
As the committee will appreciate, the banks have a very special position in this respect. They are the only type of corporation which has this special right to create inner reserves, for reasons which are well known and which were thoroughly canvassed by the banking and commerce committee when the Bank Act was last revised. Of course, as the committee is probably aware, in matters of this kind the minister acts upon the advice received-

from the inspector general of banks who is in constant touch with the operations of the banks. This is really a complementary provision to the provision which is now in section 11, subsection 4. But I must say that I believe, having accepted the principle- as the banking and commerce committee did in the last parliament-that the Minister of Finance must be given this responsibility of determining whether or not the inner reserves are in excess of the reasonable requirements of the bank, he should make provision that they must be taken back into income.


Donald Methuen Fleming: As to the complementary feature which the minister has mentioned, was he referring to the review of the Bank Act or the review of the Income Tax Act?


Douglas Charles Abbott: The review of the Bank Act. This method of determining what are appropriate inner reserves for banks to have was established at the last revision of the Bank Act, as those who were members of the committee will recall; and the Minister of Finance was given special responsibility with respect to those inner reserves. He had the right to say that reserves may be needed which are not in excess of the reasonable requirements of the bank. But if it develops that reserves have been set aside-and quite properly set aside-but that in the ordinary operations they become, in the minister's opinion, in excess of the reasonable requirements of the bank, then obviously in the interests of what is proper and fair, the excess should be brought back into income and tax paid on it.


Donald Methuen Fleming: There are two questions I should like to ask the minister to deal with. The first is this. What are the principles which guide the minister in determining whether the reserves are or are not in excess of reasonable requirements? Second, with regard to the second subsection, what is the reason for giving the new section 9 of the act retroactive effect?


Douglas Charles Abbott: On the first question, of course, that is determined by the exercise of judgment as to whether the amounts which are reserved against the bank's total assets are or are not adequate. That involves the exercise of judgment on the part of the minister, assisted by his permanent officials and the inspector general of banks. If the bank's assets in the form of loans are, let us say, $50 million and there is-and I am using an extreme case-an inner reserve of $40 million against them, I think that even the veriest layman would conclude that is in excess of the reasonable requirements of the bank.

But to answer my hon. friend directly on the matter, it must involve the exercise of judgment on the part of the minister. I think that I should say that that judgment is exercised largely on the basis of fairly well recognized and predetermined formulae in this matter and, as I have indicated, with the advice and assistance of the inspector general of banks.
As to the second question, I am informed that there has never been any question but that it should be taxable when brought back into income, but that technically the law was not clear. The putting of this provision in the law was overlooked. The banks had never questioned that if it were brought back into income it should be taxed; because these inner reserves are, of course, created out of income which has not been subject to tax. The rule is therefore made applicable to the year 1949. So far as I recall, I do not think-well, I had better not speak from memory. I do not recall whether or not any have been brought back in within the last year or two.


Donald Methuen Fleming: I have an extremely strong
feeling against retroactive legislation and it is not without reason, I think, Mr. Chairman. The minister has indicated that this appears to be, as he has put it, or as I understood him to put it, a codification of the principles that have been observed in connection with bank assessments hitherto. If that is the case, I think it might be quite satisfactory to leave the matter as it is and to enact legislation now to the extent necessary to deal with the situation now, to come into effect now or as of the date of the budget proposals in the ordinary way. But I do not think that the minister has made out a case for applying this section back to January 1, 1949. That is the effect of the second subsection. If there is no particular situation calling for the enactment of retroactive legislation, then I strongly urge that the committee should not approve the retroactive operation of the new amendment.


Douglas Charles Abbott: No one, the banks or anyone else, has ever seriously questioned that when these inner reserves are brought back into income they should be taxed. I am afraid I could not countenance that suggestion. I do not think this procedure has ever been seriously questioned. It is to repair what may be really a technical lack in the act. That is the position.


James MacKerras Macdonnell: I should
like to back up what the hon. member for Eglinton has said. If I thought there was ainy danger of tax evasion, I would not feel that way about it. But I think the minister
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has assured us that is not so. Certainly my own experience would wholly confirm that view. But I feel that this habit-and it is almost a habit we are getting into-of retroactive legislation is extremely undesirable. Unless the minister feels there is some reason for it, beyond what he has given us, I would hope that he would give heed to what the hon. member for Eglinton has said.


Douglas Charles Abbott: I have just as strong objection as have my hon. friends to what is really retroactive legislation. But this is a section which should have been in the act from the very moment that section 11, subsection 4, was in it; that is 1949. Nobody is going to be prejudiced by putting it in now. I feel that the two sections should be made effective from exactly the same date. I think that in this case I would have to insist on my stand.


James MacKerras Macdonnell: I will not
say anything more except this. When we condone retroactive legislation because it is not going to hurt anybody, it is easy to do it in the case where it does hurt somebody; and later on this afternoon I am going to refer to a case where it is going to hurt somebody. That is why I am anxious to get a good precedent established.


Douglas Charles Abbott: I think the exception proves
the rule. There are cases, and I have seen them in the course of my experience, where so-called retroactive legislation is fully justified.


Gordon Graydon: And you have iseen some in which it was not.


[Stage Direction]
Section agreed to.
On section 3-Deductions allowed.
Mr. Sinnotl:: In looking over these deductions allowed, may I say that I noticed that union dues were disallowed until just recently, and I thank the minister for allowing them to be deducted. But since that time that they have been allowed to be deducted, I notice that union dues have increased to about twice the amount they were before. However, I wish to speak for another class of people in Canada, namely those who are not able to help themselves. Deductions are allowed for those in the family who are under sixteen years of age. There are quite a few people in this country who are incapacitated and who are kept by their families. Last week end I happened to visit a home not very far from Ottawa and I found a crippled person there who was unable to take care of himself, and the family is taking care of several people throughout the country. There are several boys in my own municipality who are kept wholly by their

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parents. I would ask the minister whether he would take into consideration the granting of some deductions to parents who are keeping this class of citizen. I should like to have an answer to my suggestion.


Douglas Charles Abbott: The act at the present time
in section 25, subsection 1 (c), provides that deductions may be made for every child over 21 years of age who is dependent by reason of mental or physical infirmity. These conditions have to be established. If a taxpayer has a child who is completely incapacitated because of blindness and who is thirty or forty years of age, a deduction may be claimed for that child in the same way as it may for a completely dependent infant.


Stanley Howard Knowles: It is unnecessary for me
to say how much I welcome the part of section 3 of this bill which re-establishes the right of trade unionists to deduct their dues for income tax purposes. I shall not take any time to go over the history of the matter in past sessions, for it is a matter of record. I am pleased that this action is being taken.
When we were discussing the matter at the resolution stage I expressed some concern lest the definition of trade union dues might not be completely satisfactory. At that time the minister was good enough to say that he would be pleased to receive any suggestions when we reached this stage of the bill. I must respond to the attitude of the minister expressed at that time by stating that to a very large extent I find the definition of trade union dues satisfactory. I will have to qualify that by saying there are one or two aspects of the definition that
1	want to get clear in my mind. I think the minister's wording in the bill is at least moving in the right direction.
First of all in the new subsection 10 (d) (i) we are told that a trade union is as defined, and I quote:
(i)	by paragraph (r) of subsection (1) of section
2	of the Industrial Relations and Disputes Investigation Act, or
(ii)	in any provincial statute providing for the investigation, conciliation or settlement of industrial disputes.
I think it would be appropriate for me to put on the record at this point what that definition of a trade union is, as it appears in the national labour code. The definitions in the provincial labour codes are similar. By turning to section 2, subsection 1, paragraph (r), of the federal statute, we find:
(r) "trade union" or "union" means any organization of employees formed for the purpose of regulating relations between employers and employees but shall not include an employer-dominated organization.

Well, that is good. That definition of a trade union is completely acceptable to the trade union movement, and it excludes what are sometimes referred to as company unions. So far so good; but when we get down a little further in the section we do find a couple of qualifications. One of them is a qualification that eliminates that portion of union dues which is levied for or under a superannuation fund or plan, or for or under a fund or plan for annuities, insurance or similar benefits. I know that the minister may reply to me by saying that in some cases the portion of union dues that is levied for a pension fund is covered by another section in the Income Tax Act. That is true. Section 11 (1) (g), which the present amending bill does not seem to touch so far as I can ascertain, says:
Not exceeding in the aggregate $900 in the year, if retained by his employer from his remuneration for or under the fund or plan in respect of services rendered in the year or paid into or under the fund or plan by the taxpayer as part of his dues for the year as a member of a trade union.
I did not read all of the parts that connect that subsection to the rest of the section, but the effect of it is that if part of a trade unionist's dues is for a superannuation plan, and if that plan has been approved as a proper pension plan, approved by the Department of National Revenue, then that portion of union dues which is a contribution to a superannuation plan is allowed. I see the minister nodding his head, and that indicates that I am stating the position correctly thus far. In other words, it adds up to this, that in a case where a trade unionist's dues are in part dues for the general operating expenses of the union, and in part for a superannuation plan, he may get all of them allowed if the part for a superannuation plan is paid into a plan that has been approved by the Minister of National Revenue. If that plan is one that has not been approved by the Minister of National Revenue that portion of his dues will not be allowed as a deduction for income tax purposes.
I am going to come back to that in a moment, because there is an aspect to it that I want to discuss with the minister; but before going into it further I think I should raise a question about paragraph (c) of the new subsection 12, which reads:
For any other purpose not directly related to the ordinary operating expenses of the association or trade union to which they were paid.
The effect of that is to say that it is only that portion of trade union dues which is used for purposes directly related to the ordinary operating expenses of the trade union that will be allowed. The question that is in my mind as a result of that qualification

is this: Who decides what portion of a trade unionist's dues is for purposes directly related to the ordinary operating expenses of the union? Will there be regulations made by the Department of National Revenue, or is it left to the union, or on what basis is the decision to be made?


Douglas Charles Abbott: It is a question of fact. The department will rule and if the taxpayer is not satisfied he will go to the income tax appeal board for a ruling. It is a straight question of fact.


Stanley Howard Knowles: No extra regulation?


Douglas Charles Abbott: No.


Stanley Howard Knowles: The trade unionist will claim the deduction. If the department thinks it is not a proper deduction it will disallow it.


Douglas Charles Abbott: Right.


Stanley Howard Knowles: If the trade unionist feels it has been wrongly disallowed he takes the case to the income tax appeal board?


Douglas Charles Abbott: Right, it is a straight question of fact.


Stanley Howard Knowles: That seems reasonable so far. It would depend on how it works in practice. Now I want to come back to the other question, namely, that of the portion that goes into a superannuation fund or plan. It is clear that the decision in that connection is not made on the basis of what might be called fact, but rather it is made on the basis of a decision that is rendered by the Minister of National Revenue.


Douglas Charles Abbott: That is true of all superannuation funds.


Stanley Howard Knowles: I realize that is true of all superannuation funds. I have a case which illustrates this problem quite clearly. It is one I have taken up with the minister across the floor of the house on previous occasions. In fact the last time I took it up with him I thought I got his agreement to the position I was taking here, and that it would be only a matter of time until the appropriate officials would agree.
But I did not have as much success with the officials in the department as I had with the minister himself. I thought the minister was at the top, but I found out when I went-


Mr. Maclnnis:: You found out he was hard boiled.


Stanley Howard Knowles: No; the minister was reasonable. But when I went to the official with whom I had to deal I did not find him to be similarly reasonable. I am referring to the case of the International Typographical Union, of which I speak with some knowledge, because I happen to be a member of it.
Income Tax Act
The International Typographical Union has a pension fund which is administered from the head office of the union located at Indianapolis. In order to be a member of any local of the International Typographical Union a charge for the superannuation fund has to be paid as part of the union dues.
The Department of National Revenue has approved of that master superannuation plan. The result is that for quite a number of years members of the International Typographical Union have been allowed, as a deduction, that portion of their union dues which went toward that approved pension plan. The amount paid into that fund is two and a half per cent of the income earned at the trade.
It so happens that one of the locals of the International Typographical Union, Toronto local No. 91, felt that, good as the pension plan now is-paying to retired members of the union $18 a week-it could be improved upon. With that in mind the Toronto local No. 91 of the International Typographical Union worked out a supplemental plan. That supplemental plan requires each and every member of the Toronto local to pay an additional one per cent into a local fund out of which, when a member retires, he receives an additional $5 per week.
The point I make is that the requirements attached to the additional one per cent, the supplementary plan, are on all fours with the requirements of the master plan administered from the head office at Indianapolis. One could not be a member of local 91 of the International Typographical Union at Toronto without paying the additional one per cent, just as I could not be a member of local 191 in Winnipeg without paying the two and a half per cent required by the international laws of the union. It seems to me that the two are completely on all fours.
If, as I agree, the master plan of two and a half per cent can be approved as a deduction,-and it has been so approved over the years-the additional one per cent required by the Toronto local should also be approved by the Department of National Revenue. I would point out that the local in Toronto got full approval of the head office of the union at Indianapolis before it was able to make this extra one per cent a requirement of membership in the Toronto local.
I have a thick volume of correspondence in the matter. I have been in the office of the particular official of the Department of National Revenue who handles this sort of thing. In addition to that I have had correspondence with the officials of the Department of Finance, with whom the minister a year ago told me to get in touch. And, by

Income Tax Act
the way, when he told me that I felt hopeful; I thought I was getting somewhere.
A number of positions have been taken against this plan by the particular official who seems to have the say. According to the act it is the Minister of National Revenue who would have the say; but, in fact, it seems to be this particular official. On one occasion he tried to tell me that the wording of the plan for the supplementary program in Toronto did not make it clear that all the members of the Toronto local had to contribute. He picked out a particular phrase which said that employees of the union may become eligible, and laid great stress on the use of the word "may".
I have since pointed out that all that paragraph refers to is clerks and secretaries who may work for the union, in the office. It does not apply to the members of the union. They must pay this additional one per cent.
The other basic objection which this particular official has taken to the plan, as indicated in letters I have had from the Minister of National Revenue, from one of the officials of the Department of Finance, and others, is that these officials look upon this plan as essentially a savings plan rather than a retirement plan. For the life of me I cannot see how that can be said about the additional one per cent that makes provision for a supplementary $5 any more than it can be said about the two and a half per cent which makes possible the basic $18 a week pension for retired members of the union.
The whole purpose of the basic pension plan of the International Typographical Union is to provide for retired1 printers a pension; and the whole basis of the Toronto supplementary plan is to provide a slight increase ini that pension for retired printers.
I raise this case for two reasons. First, I feel very strongly that an injustice has been done to the members of Toronto local 91. The more I go into it, the more I am convinced that the only reason for the continued rejection of this supplementary plan is because a position was taken by a certain official, and he does not want to change that position. The other reason I raised the matter is that it illustrates a problem we may run into in connection with that part of union dues deductibility clause which rules out any of the amounts which go into a superannuation fund. It is unfortunate that it is left in this way to the discretion of certain officials. It seems to me some better way could be found to define that part of the dues so that people who pay part of their dues into a bona fide 
superannuation plan will not have that portion disallowed by a departmental official when they apply for a deduction.
There are one or two other points I should like to mention, but I would ask the minister to deal with this superannuation question. We shall wait and see how that part of the definition which speaks of purposes directly related to working expenses of a union works out. I am satisfied with the definition of a union as taken from the national labour code. But I am not satisfied with the part relating to superannuation.
While I am on my feet, may I say I am glad to note that the provisions of this section are fairly wide, in that they include professional membership dues. This would include those different groups including teachers, doctors, lawyers, engineers, architects and all those others who were mentioned in the debate on February 26 of this year when my motion was before the house. I am glad to note that there is no limit to the kind of dues which may be allowed, provided they are dues necessary to be paid in connection with one's occupation.


Donald Methuen Fleming: That is the first time I have heard the hon. member say a good word for the lawyers.


Stanley Howard Knowles: Oh, my hon. friend should look back across the pages of Hansard. If he did he would find that there have been other times when I have had a good word to say for them-and I have had other words, too, of course. But, in all fairness it does seem to me that this section is good in what it does. The aim is, I believe, to be fair to all concerned. I should like to hear from the minister, particularly on the question of superannuation.


Douglas Charles Abbott: I thank my hon. friend for the compliment he has paid to the drafters of this section. I must tell him a great deal of time was spent in working out the definition of eligibility and I think it is probably a pretty good definition. Nothing is perfect and it may be that in subsequent years it will be found it needs improvement, but I think it is a good starting point. The hon. member has raised the question of superannuation. As he has pointed out, the Income Tax Act for many years has only allowed payments into approved pension plans as deductions. The responsibility for approving those plans rested with the Minister of National Revenue. As the hon. member has pointed out, there is an officer or there are officers in the department specially charged with that responsibility. I

am informed that there has been put out a book which enunciates the principles which are followed in approving these plans.
I am not in a position to argue, nor shall I attempt to, the merits of the particular plan to which the hon. member has referred. All I can say is that the further representations which he has made today will be brought to the attention of the Minister of National Revenue and his officials. I do not know whether the hon. member has brought out any new facts today, but 1 cannot attempt to make any critical analysis of the plan because the responsibility of approving or refusing to approve the plan does not rest with me. I do not know that I can add very much so far as the hon. member's grievance that this particular supplemental payment has not been allowed is concerned.


Stanley Howard Knowles: I thank the minister for the attitude he has taken and I appreciate that the representations I have made today will be referred to the Minister of National Revenue. I trust that this case will be looked at from scratch and not on the basis of a decision already given. Since my representations are being turned over to other authorities may I take just a moment longer to point out that one of the arguments used against this plan and which was contained in a letter to the union was as follows:
When employee contributions are deductible for tax purposes, they must be withheld and paid over by the employer.
That, is one argument that the official used, namely, that these payments were not withheld by the employer and paid into a fund, but were withheld by the employees' own organization, namely, the union. I should like to answer that by quoting the wording of the latter part of section 11 which refers to money paid into or under a fund or plan by a taxpayer as part of his union dues for the year as a member of a trade union. In other words, the law provides clearly, not only for the kind of payment that is withheld by an employer and paid into a fund but also for the kind of payment that is made by a taxpayer as part of his union dues.
As I said before, a good deal of the argument of the officials who have rejected this plan thus far dwelt on the theme that this was more a savings scheme than a pension plan. Any pension plan that is based on building up a fund might be called a savings scheme as distinguished from the pay-as-we-go plan that is going to be brought in with respect to old age pensions.
I have tried to give this case the best study I could, partly because of my relationship
Income Tax Act
with these fellow trade unionists, but also because I wanted to make an objective study.
I feel that a wrong decision was arrived at by the official concerned and I hope that the new study which is to be made at the request of the minister will result in a change.


Donald Methuen Fleming: I have one question to ask which is prompted by the word "insurance" on page 4, line 24, of the bill, which sets out subsection 12 of the new section. Is there any reason why unemployment insurance premiums should not be included within the scope of this remedial exemption?


Douglas Charles Abbott: This relates entirely to
amounts paid as part of what are defined as union dues. It has no relation to any other payments. As the hon. member for Winnipeg North Centre has pointed out, if the union dues were $5 per month and $2 per month represented a contribution to an approved superannuation plan or any superannuation plan, the $3 per month would be deductible for income tax purposes and, if it were an approved superannuation plan, the $2 would be deductible under the other section. This section is intended to apply only to payments which form part of union dues.


Donald Methuen Fleming: I was dealing with the
principle of the matter. If you are making an enlargement of the present deductions, why should you not include unemployment insurance?


Douglas Charles Abbott: If we were going to do that
I do not know why we should not allow as a deduction for income tax purposes payments on all forms of insurance, for all risks such as fire, life, sickness and so on. That has not been considered practicable.


Hazen Robert Argue: I should like to advocate an
extension of the type of dues which may be allowed as deductions for income tax purposes. I raised this matter in the committee stage on the resolution. It is now provided that professional people of all kinds may deduct dues for income tax purposes, and this principle is being extended to union dues. But there is one main group of Canadians who cannot deduct the dues they pay for income tax purposes. I refer to our farmers.


Douglas Charles Abbott: Is the hon. member referring to the ordinary farmer in business for himself who grosses up his income and deducts the expenses of earning it?


Hazen Robert Argue: I do not think the general
farmer can deduct the dues he pays to a farmers organization.

Income Tax Act


Douglas Charles Abbott: I think those would be
allowed if claimed under the general rules which have applied.


Hazen Robert Argue: The minister is saying that
in his opinion a farmer could deduct the dues paid to a farmers organization. If I am given that assurance I shall drop the matter right now.


Douglas Charles Abbott: That is my offhand view.
The question has never occurred to me before. If dues were paid into an organization which has been set up for the purpose of promoting the interests of farming and that sort of thing, I would think the farmer could deduct his dues in the same way a businessman can deduct the dues he pays to a board of trade, to the manufacturers association or to anything else.


Mr. Fraser:: Are not dues paid to the
federation of agriculture allowed?


Douglas Charles Abbott: I think they are.


Hazen Robert Argue: The minister may be correct,
and he might have been correct if he had said this a year or two ago. All I can say is that some prominent leaders in farm organizations, to say nothing about the farmers themselves, were not aware that such dues could be deducted.


Douglas Charles Abbott: I would consider them completely analogous to board of trade dues or Canadian Manufacturers Association dues.


Stanley Howard Knowles: Or lawyers on fees.


Douglas Charles Abbott: Right.


Hazen Robert Argue: I thank the minister for his
comment. I am sure it will meet with the approval of farmers throughout Canada, and certainly my object in discussing this matter at this time has been accomplished.


Gordon Knapman Fraser: Subsection 10(a) on page 3 refers to "annual professional membership dues", and then at the bottom it says: ". . . that he was required by his contract of employment to maintain". Would that also apply if he was self-employed?


Douglas Charles Abbott: He gets it automatically if he is self-employed because there he grosses up his income. The lawyer or engineer who operates on his own account on a professional basis puts in his gross fees, and charges up his office rent, expenses, his bar dues, and so on. This extends it to the salaried professional man.


Gordon Knapman Fraser: Under subsection 13 it refers to one-half the fees paid to an investment counsel.


Douglas Charles Abbott: That is to confirm what has been the practice for a great many years.

My hon. friend is aware that there are these investment counsel who assist those who are more fortunate than others in investing their capital and seeing that it suffers as little loss as possible. I believe a question was decided by the income tax appeal board that this was not a charge against income but was properly a capital charge. For a great many years the department had administratively allowed 50 per cent of these fees as an expense against income as being a fair proportion representing that portion of the charge which was incurred in earning the income, and the other as capital. It seemed to me and to the department that it was fair to maintain that practice, and it is for that purpose that this section is in the bill.


Gordon Knapman Fraser: I know members of parliament are receiving letters from these investment counsel every week. I know some people I have met who employ two or three such counsel because they want to average them up and see where they stand. Are they allowed half of the fees of each counsel?


Douglas Charles Abbott: So far as I am aware, if a man pays a fee to this particular type of professional man, and if he is the super-cautious type who wants to have one to check the other, he can charge off 50 per cent. He has to pay 50 per cent of it himself. There is no deduction for 50 per cent.


Charles Edward Johnston: I should like to ask a question with respect to section 3 on page 2 concerning the repaying of borrowed money. It seems to me that the only deduction that would be allowed from income tax would be the interest on that borrowed money.


Douglas Charles Abbott: This is a relieving section. There was a little lack in the law. In certain types of contracts there is an attributed interest content, and that is required to be included as income by the person who receives it.


Charles Edward Johnston: What it refers to is the attributed interest content.


Douglas Charles Abbott: That is correct. Taking the reverse situation, if I as the lender under these circumstances am required to include it in my income, the man who is paying it to me can include it as an expense. That is the effect of the section. It is a relieving section. It seemed the sensible thing to do.


James MacKerras Macdonnell: Under this section I think I should raise a very earnest expression of grievance I have from the acting profession, actors, musicians and such. I will read a short extract to the minister, and then I should like to know what the effect

of this is, or whether there is any other relevant section. One letter reads in part:
. . . the department has seen fit to place us in the category of "piece workers" or as in a "master-servant" relationship.


An hon. Member:: How do you spell it?


James MacKerras Macdonnell: He spells it p-i-e-c-e. The letter continues:
This means we are allowed no business deductions, even though we may incur very heavy responsibilities for music, equipment, reference material, travelling expenses. Neither can we receive such direct employee benefits . . .
And so on. The next letter adds something which is of interest. First of all it makes the same complaint. It reads in part:
This means we are allowed no business deductions, even though we may incur very heavy responsibilities for music, equipment, reference material, travelling expenses.
Further on the letter continues:
Surely, sir, Canadian artists have had a singular sti uggle to gain recognition and a not too steady income w.thout being burdened with unjust and illogical taxation. Both in the United States and in Great Britain the professional status of the free lance artist is recognized.
First of all I merely want information from the minister as to how far what I have read is accurate. Then I should like to suggest what seems to be a reasonable attitude, but I will wait first of all to hear if that is an accurate statement of the position.


Douglas Charles Abbott: It is a new thought to me. I had not realized that there were special problems of the artistic profession. They would ggt some relief of course under subsection 3 of this section, where an officer or employee is ordinarily required to carry on his employment away from his employer's place of business and under the contract of employment was required to pay the travelling expenses incurred by him in the performance of the duties of his office or employment.


James MacKerras Macdonnell: Does that not refer to an employee?


Douglas Charles Abbott: I am assuming that an actor in a travelling theatrical company would be paid a salary.


James MacKerras Macdonnell: In the cases
I am bringing to the minister's attention they are free lance artists.


Douglas Charles Abbott: In that case they are just the same as any other self-employed person. They gross up their income and deduct their expenses just the same as a lawyer, doctor, engineer or anybody else. If they are not on salary, if they are self-employed, they are entitled to deduct expenses wholly and necessarily incurred for the purpose of earning the income.
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James MacKerras Macdonnell: How does the minister explain what I understand to be the fact, that these persons are not allowed any business deductions even though they may incur heavy expenses for music, equipment, reference material, travelling expenses and so on? As I understand the minister, those would be the kind of things that could be deducted.


Douglas Charles Abbott: It was brought to our attention that in certain cases musicians, for instance, were required to provide music under the terms of the contract and were required to provide certain other things. Under the amendment that we have here they may be able to deduct these things from their salary. In certain cases if they have to be absent for any reason, and have to provide a replacement, then under the amendment they are entitled to charge whatever they pay for their replacement.


James MacKerras Macdonnell: Let me go a
little further. These people seem to have been harshly treated. Perhaps they have never had a sympathetic minister to speak to before.


Douglas Charles Abbott: Perhaps they have not had very sound tax advice. I do not know.


James MacKerras Macdonnell: To carry this matter further, people of this kind would have agents' commissions. They might have advertising expense. They would have repairs to musical instruments, and so on. Again, would all these things not be of the kind or nature which might be deducted by a self-employed person?


Douglas Charles Abbott: As my hon. friend knows, mixed questions of fact and law are involved in these cases, and without knowing the precise facts of the individual case it is very difficult to give a definite opinion. The general rule is that a person who is self-employed grosses up what he receives in fees or other remuneration and deducts from that the expenses which he has been obliged to incur to earn that income. Of course they must be wholly and necessarily, and all the rest of it. It is a mixed question of fact and law, and I would find it extremely difficult to give a firm offhand opinion as to what the result would be- in a particular case. If my hon. friend will give me the particulars of this case, I will have it carefully looked into. I do not want to give an offhand legal opinion here.


James MacKerras Macdonnell: Is the full statement of the law contained in this section? If not, would the minister let me know whether there is anything else that is applicable?

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Douglas Charles Abbott: One has to look at the definition of income from office or employment, and then section 11 is the section which outlines the various items that may be deducted from the gross amount.


Donald Methuen Fleming: The class of person to whom the hon. member for Greenwood has referred, namely musicians, actors, radio artists and so on, have a very real problem. The minister may suggest that in the past they may not have had good advice with regard to their tax position, but I may tell him that their position has been taken up with the Department of National Revenue. If I am not mistaken there was a recent decision of the income tax appeal board dealing with expenses sought to be brought into their returns as deductions by persons in this category; and the view that has been taken by the Department of National Revenue as to proper deductions in the case of a musician or free lance artist such as those referred to has been very narrow indeed. If the minister will look into the files of the Department of National Revenue on this subject I think he will find that the interpretation that has been applied to outlays for the purpose of earning income in the case of persons of this category is extremely narrow. After having taken up the case with that department, and having had some correspondence about it, it seems to me such persons have a legitimate grievance. If the provisions of the act at present are so narrow that such persons are denied deductibility in the case of such expenses as have been referred to this afternoon, I think it is high time the act was amended and broadened to meet the legitimate exigencies of such cases.


[Stage Direction]
Section agreed to.
On section 4-If chief source of income not farming, etc.
Mr. Calherwood:: The explanatory note for this section reads:
The new subsection allows a deduction for one-half the loss incurred in farming, but not to exceed $5,000, where farming is not the chief source of the taxpayer's income.
I presume this is intended to give some compensation to those who might be classed as gentlemen farmers. These citizens are a real asset to agriculture, and have rendered a real service to it. As a matter of interpretation, is depreciation on property allowed on the farm income?


Douglas Charles Abbott: As the hon. member points out, this section is intended to give some measure of relief to those who may be colloquially known as gentlemen farmers, whose principal occupation is not farming. Again this confirms what was a practice over a great many years, during which the income tax
fMr. Macdonnell (Greenwood).]
branch allowed 50 per cent of the cash losses incurred in this type of farming, secondary income; and by cash losses it meant without charging depreciation. It was a rule which, as it developed, probably was not strictly justified under the act. We had a great many representations that the practice which had existed for many years, I believe going back to the early twenties, should be maintained. It was felt that it would not be appropriate to do so without any limit, because some might run very elaborate farms with very large losses in fancy horses and that sort of thing. Probably it would not be fair to allow such losses without limit, so the present section was inserted fixing a limit of $5,000. This means in effect that on the net cash basis, without allowance for depreciation, a man who has a cash loss of $10,000 will have to stand $5,000 of it himself and the other $5,000 can be deducted from his other income. I agree with my hon. friend that this type of farming has proved beneficial to a great many parts of the country, and we had representations from agricultural associations asking us to maintain the practice which had been followed in previous years. That is the reason for this amendment.


Gordon Knapman Fraser: Does subsection 2 mean they
can claim back to 1949?


Douglas Charles Abbott: Yes. The previous practice to which I referred went up to 1949, which was the date of the introduction of the new act. We want to make the same practice carry on, so in this case the retroactivity of #te legislation is beneficial. It is to carry forward the existing practice.


James MacKerras Macdonnell: I have
ventured on one or two other bills to raise a question concerning legal verbiage, and I am going to do the same thing here. The note on the right-hand side of the page says:
-where farming is not the chief source of the taxpayer's income.
I think I can understand that, but let me read the wording used to describe that in the act itself. I do not know what I would have thought that meant if it had not been for the clear statement we had from the other side:
Where a taxpayer's chief source of income for a taxation year is neither farming nor a combination of farming and some other source of income, his income for the year shall be deemed to be not less than his income from all sources other than farming (after application of the rule in subsection (1)) minusand so on. I do not want to speak in any cheaply critical way of people who have to draft legislation, because I am sure it is very difficult.


Douglas Charles Abbott: My hon. friend is absolutely right on that point. If he had had any extensive experience along that line, as I expect he has, he would know it only too well.


James MacKerras Macdonnell: I accept the rebuke in good part, but perhaps the minister would explain the reason for this rather complicated and hard to understand wording.


Douglas Charles Abbott: This was a very difficult section to draft. It relates to section 13 (2) of the act, which reads:
13. (1) The income of a person for a taxation year shall be deemed to be not less than his income for the year from his chief source of income.
(2) The minister may determine which source of income or sources of income combined is a taxpayer's chief source of income for the purpose of this section.
I am told by the draftsman that it was necessary to make perfectly clear that this section should confer the benefit which was intended upon those who were entitled to it and upon no one else. I have had occasion to say before that I do not know that it is very profitable to engage in an interpretation argument here in the house. I have the greatest confidence in the assistant deputy minister of justice, who was the principal draftsman of this act. It may be that others could make it a bit clearer; things can always be improved, but in my experience I have found his drafting airtight, and that he does express what it is intended to put in the act. Until I am prepared to substitute myself for him I have to rely upon the assertive argument that this drafting is clear in its terms. I might adopt the tactic which I understand was used by the late R. B. Bennett when anyone asked him what a section meant. He would say, "Why, it is as plain as the nose on your face." Then he would read it in a loud, firm voice and say, "Isn't that clear?" and then sit down.


[Stage Direction]
Section agreed to.
Section 5 agreed to.
On section 6-Medical expenses.
Donald Methuen Fleming: I should like to make one or two observations on this clause.
Obviously this is a step in the right direction, and the minister is to be commended for at last recognizing, even in a limited way, the claims that have been put forward in the house for years that expenditures on necessary drugs should be recognized as a medical expense under section 26. I am not going over all the ground that has been covered in that respect, but I remind the committee of the injustice and discrimination that exists at the present time. Apart from this new and very limited amendment the department rejects any claim for expenditures on drugs and medicines purchased from 80709-258
Income Tax Act
a qualified dispensing pharmacist. But if the taxpayer happens to reside in the country where his physician does his own dispensing, and the cost of medicines or drugs is normally included in the fee of the physician, the full amount is allowed by the department. This has created a discrimination, not only against taxpayers who are sent by their physicians to pharmacists to get prescriptions filled, but also against the pharmacists themselves.
Of the proposed amendment I have only this to say, that it is commendable as far as it goes. It is regrettable that it selects only three or four drugs for recognition for exemption under section 26, the clause dealing with medical expenses, but I express the hope that since the minister has yielded even to this limited extent, a principle now has been recognized. As time goes on perhaps the minister, to the extent of his opportunities in office, will see to it that the recognition of this proper principle will be enlarged.


Gordon Knapman Fraser: As to insulin, I understand that if it is bought in a drug store it is not deductible. Is that right?


Douglas Charles Abbott: No. If it is bought in a drug store with a prescription, it is allowed.


Gordon Knapman Fraser: There must be a prescription?


Douglas Charles Abbott: That is correct.


Gordon Knapman Fraser: Does the taxpayer have to send a copy of the prescription in with his tax papers?


Douglas Charles Abbott: That is an administrative matter. We have not that information here. I would doubt if he would have to do that.


Gordon Knapman Fraser: I just wondered, because
insulin is not handled by the doctors; and the people have to go to the drug store.


Douglas Charles Abbott: So I understand. That is why it is put in here; it is realized that it is bought from the drug store.


Stanley Howard Knowles: When we were discussing
this item at the resolution stage I raised with the minister the question of further amending section 26, subsection (b) of the Income Tax Act with a view to wiping out that 4 per cent figure in relation to medical expenses. I asked the minister at that time if he had read the remarks I made on this question on April 17 as reported at pages 2131 to 2138 of Hansard. He did me the honour of indicating that he had read that speech. Then he went on to say, as reported at page 3177 of Hansard of May 18, and I quote:


Douglas Charles Abbott: I think I shall have to restrict
myself at the moment to saying I shall give further consideration to my hon. friend's representations.

Income Tax Act
That is good'. Then he goes on to say:
One advantage of doing that is that I seem to have to open up this section every year; and with the persistence for which the hon. member is so justly noted I am quite sure he will keep this subject alive until possibly something further is done.


Stanley Howard Knowles: I will.
I am sure that the minister, now that he has met my request for the deductibility of trade union dues, must be wondering what resolution I am going to put on the order paper next year to take the place of that one. I think it would be only fair at this point to let him know what my resolution will be amongst private members' notices of motion next year, for it relates to this matter that is now before us. So that he can be thinking it over between now and the next session, I will give him an advance indication of the wording of my resolution.


Douglas Charles Abbott: Thank you.


Stanley Howard Knowles: It will read as follows:
The following proposed resolution-That, in the opinion of this house, the government should give consideration to the advisability of introducing legislation amending the Income Tax Act so as to permit taxpayers to deduct from their incomes, before computing the amount of income tax to be paid, the aggregate of their medical expenses, as defined in the said act, rather than only that portion in excess of 4 per cent of the taxpayer's income, as is provided in the act as it now stands.


Douglas Charles Abbott: I will be mulling that over.


Stanley Howard Knowles: That is good. If the minister will read again the speech .that I made on April 17-


Some hon. Members:: Oh, oh.


An hon. Member:: It is bad enough to
have to listen to it.


Stanley Howard Knowles: -and will consider it in
the light of this resolution which will be before the house at the next session, I hope when that time comes he will be prepared to agree to the passing of that resolution. If he is not prepared to agree to the passing of it at that time, I will be satisfied with the same result as that obtained this year when a resolution of mine was defeated, but had the support of a sufficient number of Liberals that when the budget came along, my proposal was in it. I hope that something will be done about this matter next year.


James MacKerras Macdonnell: There is a
question of construction that I want to raise for the minister's consideration. It may have come to him already. That is, when the basis of an assumed winding-up-


Douglas Charles Abbott: We are on section 6.


James MacKerras Macdonnell: I am sorry, I thought that section was carried.


[Stage Direction]
Section agreed to.

On section 7-Dividends received by a corporation.
James MacKerras Macdonnell: My question is on section 7. Taking the basis of an assumed winding-up as the basis of distribution, that is all right in the case of preferred and common shares. But it is suggested to me that in the case of class A and class B shares, where you have a priority with regard to dividends but an equity with regard to distribution of capital, the winding-up itself is not universally applicable.


Douglas Charles Abbott: I am informed that this amendment here is to implement a recommendation of the Canadian Tax Foundation which came in last year too late to be included in the budget. It is to take care of cases of preferred shares. We will have to look further at the class A and class B shares. There may be something in what my hon. friend says. I will be glad to look into the matter.


James MacKerras Macdonnell: Perhaps I had better say that I understood that this matter of class A and class B shares was the one brought to the minister's attention by the Canadian Tax Foundation. I thought it likely had been brought to the minister's attention.


Douglas Charles Abbott: It is to implement a recommendation or suggestion made by the tax foundation.


James MacKerras Macdonnell: We have an hour or two yet. Would it be possible perhaps to allow this section to stand and to get that point considered. If discussion continues over six o'clock, as it may, will the minister allow the section to stand until this question has been considered? Of course if we are through with everything else-


Douglas Charles Abbott: We adjourn at six o'clock today. If it goes over six o'clock, it goes over till the next sitting.


James MacKerras Macdonnell: It is a point we are all equally interested in having dealt with. As I say, if we are through with everything else by six o'clock, I will not ask to let it stand.


Douglas Charles Abbott: Let us leave it on that basis, and I will have it looked into.
Section stands.
Section 8 agreed to.
On section 9-Part payments.


Donald Methuen Fleming: In the provision under section 33A we have an averaging provision at the option of the taxpayer in certain cases with respect to certain types of income, namely payments by way of superannuation or pension fund upon the death, withdrawal or

retirement from employment of the employee. That averaging may be for the taxation year and the two years immediately preceding the taxation year. Of course, if averaging is permitted in the case of death, it would have to be with respect to the years preceding the taxation year. But I am thinking of cases where the payment is made not by reason of death but to a taxpayer who is surviving and is, we will say, living in retirement after superannuation. Would it not be much fairer to allow him to do this averaging of these payments made to him, on superannuation or retirement, over the taxation year and the two years succeeding rather than the two years preceding? Presumably in the two years preceding he has been earning his normal income. Then on his retirement in a particular year, he receives his normal income and then receives this additional payment as well. That additional payment is made because of his retirement or because of his superannuation. It seems to me, therefore, that the period to which it is properly applicable is the period after his retirement. In a case of that kind it seems to me not only logical but fair that he should be permitted to do his averaging over the taxation year and the two years following rather than over the taxation year and the two years preceding.
If the minister raises the argument that that procedure may necessitate the reopening of assessments with respect to the taxation year as the taxpayer ascertains his income in each of the two following years, may I say that I am quite sure that that difficulty can be overcome. In this bill we have a provision today to cover just such a case; it is a section which we are coming to shortly. It seems to me that the case I am putting before the minister has logic and fairness behind it.


Douglas Charles Abbott: I will consider the representations that have been made. The present system, of course, was intended to provide an effective rate at the approximate rate at which the deductions were made. That is why we go back instead of forward. It is a very complicated subject, and I would not attempt to analyse and answer my hon. friend's arguments here on the floor of the house, but I will study his representations. I believe that the system we have now is the fairer, but I will be glad to have a look at it.


Donald Methuen Fleming: I am sure everyone is glad to find the principle of averaging in the bill. The principle is perfectly sound, because the payment made in the time to which we were referring is an abnormal payment. It is not referable to the income of that particular 80709-2581
Income Tax Act
year. Therefore, the principle of averaging is sound, and I am sure it commends itself to every member of the house, but the period, it seems to me, ought to be one that takes account of the following years, which are the years during which the abnormal payment is designed to assist the taxpayer.


[Stage Direction]
Section agreed to.
Section 10 agreed to.	.
On section 11-Rate.
James MacKerras Macdonnell: This is the clause which I mentioned a little while ago, and I hope to persuade the minister that the retroactive feature of it is bad.
When we were considering the retroactive feature in section 2 the minister laid emphasis on the point that nobody was going to be affected by the retroactive feature, and therefore he declined to change it. In this case no such argument can be made. I have a case where a litigant in effect already is, I think without doubt, going to be preju-dically affected if this is made retroactive, and therefore I wish to stress very strongly to the minister that the retroactive feature is not necessary unless there is some overwhelming reason for it.
In the second place, I want to question these new words "directly or indirectly." It is pointed out to me first of all that there is a certain judicial definition of the words "direct or indirect control", but no means of finding what direct or indirect ownership means. I want to read to the minister a brief quotation from a judgment of Lord Simonds, which seems to me very relevant. This is a reference to I.R.C. v. J. Bibby and Sons (1945) AH England Reports, volume I, page 673:
Those who by their votes can control the company do not the less control it because they may themselves be amenable to some external control. Theirs is the control, though in the exercise of it they may be guilty of some breach of obligation whether of conscience or of law. It is impossible (an impossibility long recognized in company law) to enter into an investigation whether the registered holder of a share is to any and what extent the beneficial owner.
I suggest to the minister that by putting in these words "directly or indirectly" we are just raising up a whole mountain of complexities and legal difficulties. I wish to underline what I said a moment ago, that in this particular case there is an appeal involved under the section, and in the normal -course it would go to the appeal board and then to the exchequer court and the supreme court; but if section 11 is amended and made retroactive it will, without doubt, prejudicially affect the litigant.

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I put to the minister two points. I ask him why it is necessary to have this complicating and perplexing addition to the act- the words "directly or indirectly." I think anyone who is familiar with it at all knows how far this may take you and how difficult it may be. Is there some strong reason why it has to be done? Second, why need this be made retroactive when, as I have indicated, it is certainly going to affect prejudicially existing situations?


Douglas Charles Abbott: I will answer the second
question first. I would not personally have the slightest objection to having this made effective from 1951 on, but it would not give relief to cases such as the brother in Halifax who had a company and the brother in Vancouver who had another company but could not agree as to who should get the $10,000 exemption. This is intended to be entirely a relieving provision, and is intended to apply from the time we brought in the definition of related companies. But I think my hon. friend will find that if at his insistence I agree to make this 1951 instead of 1949 he may have had one kick from one person, but he will get an awful lot of kicks from others who will be prejudicially affected by not making these relieving provision changes from the time that the definition of related corporations was first introduced in this act. I know that is the case. I do not know of the particular case that my hon. friend has in mind, but this is in itself entirely a relieving provision.
We had a great deal of difficulty with this section to get a definition of what were related companies, and as usual in these cases where we are working out a condition to block a possible loophole, we make the definition pretty tough, and when we see what the circumstances are we relax. This is relaxing this provision.
So far as the words "directly or indirectly" are concerned, I think these words should stay in the act because I do not think a person should get the benefit of this special low rate of tax by in fact having two companies, although in form he has no shareholding in the other. That would be a matter for the income tax appeal board if there was a question to determine as a matter of fact whether in fact he owned directly or indirectly the required percentage of the issued shares.
I feel I must insist that the phrase stay in. It is a fairly common phrase that lawyers know in legal drafting. In the province of Quebec we have a legal phrase that you cannot do indirectly what you are prohibited from doing directly. As I say, this is a
TMr. Macdonnell (Greenwood).]
relieving section and we are spelling it out in terms in the section. I would urge the committee to consider pretty carefully before they make it effective from 1951 on, and not from 1949 when the definition was first put in.


[Stage Direction]
Section agreed to.
Donald Methuen Fleming: We slipped over section 10 rather quickly. I have a question that I should like to ask, and wonder whether I could ask it now.


Douglas Charles Abbott: Yes, certainly.


Donald Methuen Fleming: Reference is made in section 10 to tax credits. In the amendment you are limiting the tax credit to dividends from a taxable corporation. What would be examples of other corporations than those in respect to which dividends are being paid?


Douglas Charles Abbott: Foreign business corporations.


Donald Methuen Fleming: That is all you have in mind?


Douglas Charles Abbott: Yes, that is right, that sort of case.
On section 12-Defence surtax.


Douglas Charles Abbott: I am afraid I have to intervene here. This is the section which provides for the surtax on corporations, and the amendment which I shall ask one of my colleagues to move in a moment strikes out the provision under which corporations, if certain conditions were fulfilled, would be given relief from the 20 per cent defence surcharge.
The committee will recall that in my budget speech I expressed concern over the fact that the proposed increase in the corporate tax, when considered in conjunction with provincial corporation taxes, could mean that more than half of a corporation's earnings would be taken away in taxes. At that time I made special reference to the position of certain classes of companies, for example, where there is public control of rates and where the companies ordinarily are able to earn only a modest return on capital. With this group particularly in mind I made provision in the income tax resolution for abatement of the 20 per cent surcharge and I quote from the resolution:
To the extent that it would reduce the corporation's taxable income after payment of ordinary income tax to an amount less than 5 per cent of its capital employed.
Many hon. members who are familiar with the difficult practical problems which arose under our wartime excess profits tax will not, I believe, be surprised to learn of the troubles I have encountered in attempting to work out a definition of "capital employed" for purposes of relief from defence surcharge which, while giving some relief in the directions intended, would not be unsatisfactory

from the point of view of its general application to all companies. For several months I have been exploring the results of several formulae put forward not only by officials of the departments concerned but also by businessmen.
I am now forced to confess that up to this time I have not found a solution sufficiently satisfactory to warrant my recommending it to parliament. I have made an honest try but have not been successful. However, I shall give the problem further consideration and study.
I think I might refer back to my general approach to the budgetary problem when my tax proposals were introduced. At that time after reviewing the current uncertainties in the world situation I said:
In another year's time we should have a clear view of the prospects. I have, therefore, decided not to recommend any major reconstruction of our tax system this year but instead to meet our current requirements by a series of simple but adequate surcharges on several existing taxes and also to widen the coverage of our special excise taxes. I think that over the shorter run this method of defence' surcharges will produce the necessary revenue with the least difficulty and inconvenience. If our optimistic hopes are realized it will be easy to reduce these surcharges or to drop them entirely, but I want to add that if it becomes clear that we are in for the long pull at these high levels of expenditure some major changes in the existing tax structure may have to be devised. My tax proposals, therefore, must be regarded as an interim policy for the period of the current year.
I shall therefore ask one of my colleagues to move:
That subclause (1) of clause 12 be amended by deleting subsections (2) to (5) inclusive of section 37 of The Income Tax Act as set out therein and by substituting the following therefor:
" (2) In this section, 'tax otherwise payable' means the tax otherwise payable before making any deduction under section 38 or any deduction allowed under any other act from the tax imposed by this part."
and that clause 12 be further amended by deleting subclauses (3) and (4) thereof.


James Garfield Gardiner: I move accordingly.


Mr. Adamson:: Then the purport of the new amendment is that the retroactive or safeguarding clause, that the taxation even after the 20 per cent surcharge could not be a sum greater than the capital of the company, has been removed?


Douglas Charles Abbott: It was found in practice, or perhaps I should say I found it, absolutely impossible at this time to work out a satisfactory definition of "capital employed"- because that was the wording. I tried a definition of "capital employed" as contained in the Excess Profits Tax Act during the war, but I found it did not fill the bill at all. As a matter of fact, as the committee will recall, as I said in my statement there was a difficulty in connection with the definition when
Income Tax Act
the board of referees had to give an attributed capital in a great many cases. I came to the conclusion that this just could not be worked out for this situation.
In the bill it is noted that I left it open to try to work out a definition. I found I simply could not evolve a definition which would be fair to all taxpayers. Therefore I am reluctantly forced to drop what I hoped might be a relieving provision.


Agar Rodney Adamson: I am glad the minister agrees that this is a retrograde step, particularly in respect of corporations who are now going to face a difficult year because of the uncertainties of materials, supplies and markets. With the 20 per cent surcharge it seems to me we are going to be faced with corporations running into a level of taxation which is very considerably higher than the minister expected.
I wonder whether through their annual statements or from their balance sheets there could not be some empirical formula worked out to see what the "capital employed" is. It does not have to be paid-up capital, capital represented by bonds or preferred stock or common stock. Surely the annual statement of most companies would give information as to the capital actually employed. I would ask the minister to tell us about that. I realize of course that it is a difficult situation.


Douglas Charles Abbott: I repeat what I said, that I have not been able to evolve a formula, empirical or otherwise, which would be appropriate. A formula which would be appropriate as related to one taxpayer, let us say, would be completely inappropriate for another. I can only assure the house we have looked at the operating results of public utility and other companies and have endeavoured to apply this formula and that formula. All I can say is that for this year I am not prepared to recommend such a measure. Therefore I am forced reluctantly to withdraw the proposal I made. I can only assure the house we will have to look at it again next year.


Agar Rodney Adamson: Then it simply means that the 20 per cent surcharge is a blanket surcharge on all corporations?


Douglas Charles Abbott: All corporation profits, in excess of $10,000, will be subject to the 20 per cent surcharge.


James MacKerras Macdonnell: It seems to me not only a very disappointing but also a surprising thing, and also a serious thing. After all, we did have a budget, and the public of Canada was advised about it. Now, without warning to anyone, so far as I know,

Income Tax Act
we suddenly find this change. It is a major change and in some cases will be a very serious change, as proposed.
I suggest to the minister that it is not fair to the committee, or to anybody else for that matter, to do this in the present offhand way, without warning. I am going to suggest to the minister that it is not impossible to do these things. I am going to ask him whether he has, in fact, called in the sort of people with whom he often does discuss matters when he is preparing his budget. I am wondering whether this particular matter might not be left for a time, and whether the section might not stand. After all, we will be here for some weeks, and I suggest strongly to the minister that we should not have what can be described only as a major change done in this way, without any notice to us or to the public, and without having further time to consider it or, if necessary, to call in other parties interested in it. I do hope the minister will accept that suggestion.


Douglas Charles Abbott: I have spent probably more time in the consideration of this section, since the budget was brought down, than any other, because it is an extremely complicated one. I regret that I cannot change the decision I have announced. It was arrived at after most exhaustive consideration by myself, by officials of my department and officials of the Department of National Revenue, after examination of the operating results of a great many companies, and even after obtaining such information as we could as to the probable operating results of companies which we felt were more particularly affected during the coming year.
I can only say that if we sat here for another two months I would not be prepared to proceed with this proposal. I regret it has not been possible to implement it. I said that in my opening statement.
I have to take the primary responsibility for these things. I have recommended this decision to my colleagues. I have made the announcement only after careful consideration, and with considerable reluctance.


Donald Methuen Fleming: I urge that hon. members should be afforded an opportunity to give to this particular question, on their part, the same degree of careful consideration the minister has given to it, on his part. Before launching into a discussion of the amendment I would ask him if he would be prepared to let it stand. It is now 5.20, and I understand we are to rise, on this bill, at 5.45. It is not probable that we shall finish the discussion on the bill tonight. Therefore we are not asking a great deal when we suggest that this section and the amendment should 
stand until the next occasion we have the bill before us, so that we shall have an opportunity fully to consider it.


Douglas Charles Abbott: I have not the slightest objection to allowing it to stand. But I wish to make it clear that the decision I have arrived at has not been arrived at hastily. That was arrived at in the light of information which I do not believe would be available, for obvious reasons, to most hon. members of the house.


James MacKerras Macdonnell: I just wish to make this other point. Does not the minister think it fair that outside parties, the usual outside parties, should have an opportunity to discuss a matter of this kind?


Douglas Charles Abbott: Whom does my hon. friend mean by "usual"?


James MacKerras Macdonnell: If my memory serves me correctly, when the minister was making a major change in the Income Tax Act we were told that it would have to wait a session so that the minister could distribute it to various organizations throughout the country in order to get their views. I am not suggesting that there were any boys in the back room or any sinister communications of any kind. I am suggesting to the minister that in attempting to reach this conclusion he should give an opportunity to those who are competent to discuss these matters to make suggestions. Does not the minister think that that would be fair? This section should not only be allowed to stand, but an opportunity should be given, if it has not been given already, to those parties who are particularly expert in these matters to make submissions to the minister.


Douglas Charles Abbott: A good many of those who are particularly interested in this question have made representations. I have had numerous conferences with them and it was following those conferences that this decision was arrived at. I have no Objection to allowing the section to stand.


Gordon Knapman Fraser: Can the minister say how much extra revenue he expects to receive?


Douglas Charles Abbott: That was indicated in my budget speech. I do not remember the exact figure, but it will be quite substantial.


Agar Rodney Adamson: Can the minister indicate if any 'companies have stated how large a percentage of their capital this surtax would amount to in the coming year?


Douglas Charles Abbott: I think some of them estimated the additional tax they would pay if their income reached a certain figure and they were

projecting their operating results for another nine or ten months in order to arrive at that conclusion.


Agar Rodney Adamson: Did any of them say that this would mean ten or fifteen per cent of their capital?


Douglas Charles Abbott: It is capital employed, which is a complex definition. Five per cent of capital would not mean much to some of them.
Section stands.
Sections 13 and 14 agreed to.
On section 15-Withholding.


Donald Methuen Fleming: This is the section which requires deductions from salaries or wages or from other payments made to certain classes of taxpayers. As the committee will realize, the regulations have recently been changed, and one of the principal effects is now to require a higher percentage of deduction than has prevailed for some years. The rate of deduction now is so high that it virtually amounts to the payment in advance of 100 per cent of the tax, with the inevitable result that when the taxpayer comes to prepare his T1 return on or before the following April 30 in most cases he will find he has overpaid, and will have to make application for a refund and wait for it. What reason can there be for departing from the percentage which has been established for some years and which appeared to be operating satisfactorily, as far as anything we have heard is concerned?


Douglas Charles Abbott: I understand that the Minister of National Revenue proposes to give the reasons for the changes in the regulations on his estimates.


Donald Methuen Fleming: I think the Minister of
National Revenue should be here to make a statement because this is the place where we will have some opportunity to deal with it. We will probably have the estimates of the Minister of National Revenue the last day of the session or the day before when everything is going through at a gallop. This is an important question which affects hundreds of thousands of taxpayers across the country, and I expect it will mean great inconvenience to them through having to make applications for refunds in the following year and then wait for the payment of those refunds. There are going to be many more applications for refunds than there have been hitherto and obviously many taxpayers will have to wait. If the Minister of National Revenue is not available I suggest that this section stand until he is here to make such statement as he intends to make. We would
Income Tax Act
then have an opportunity to examine the statement and analyse the reasons put forward in support of this new policy.


Douglas Charles Abbott: This is an administrative question, but I have no objection to the section standing.
Section stands.
Section 16 agreed to.
On section 17-Tax on income from property transferred between husband and wife or to minors.


Agar Rodney Adamson: I should like the minister to explain this new section. Does it deal only with a gift or transference or has it more far-reaching implications?


Douglas Charles Abbott: I am informed that as the law now stands if a husband transfers property to his wife he becomes liable for income tax in respect of income from that property. If he transferred all his property to his wife he would continue to be liable for income tax on the income from the property but would not have anything out of which the tax could be realized. This section is intended to block up that loophole.


Agar Rodney Adamson: As I understand it, the law as it now stands and before this section is passed would make a husband liable for income tax if he transferred revenue producing property to his wife, that is income tax on the income from that property.


Douglas Charles Abbott: That is correct.


Agar Rodney Adamson: Does this section make the wife liable for the tax on that property?


Douglas Charles Abbott: It is really a collection section; it makes it possible to collect under certain circumstances.


James MacKerras Macdonnell: Does it
lessen his tax?


Douglas Charles Abbott: There is only the one tax; there are not two taxes.


Agar Rodney Adamson: Under this section a husband could transfer revenue producing property to his wife and be relieved of taxation if he was in the higher bracket.


Douglas Charles Abbott: The tax liability would be determined in respect to the husband's income, but it would be possible to take it from the wife. It is almost like a garnishee in her hands.


Agar Rodney Adamson: If the husband transferred property producing a revenue of $1,000 a year his income would be reduced under this section by $1,000.


Douglas Charles Abbott: No, his income would continue to be $1,000, but if he did not pay the tax

Income Tax Act
on it the department could assess the wife for the amount of the tax.


Agar Rodney Adamson: Let us say that a husband has an income of $10,000 a year and transfers to his wife a piece of property bringing in a revenue of $1,000 per year; then his income would be $9,000 a year. His wife's income increases by $1,000 a year. Is that the import of this?


Douglas Charles Abbott: His income would still be $10,000, but I take it that under the section the minister can assess the wife for the income with respect to that portion of the property which had been transferred to her.


Agar Rodney Adamson: I do not think that answers my question. I do not think it is clear at all. Do you mean that if the husband transfers stocks, bonds, a house, or anything else, to his wife and gets no income from them, he still has to pay income tax on them?


Douglas Charles Abbott: That is correct. That has always been the law. It has been the law for years.


Gordon Graydon: And still you can tax her?


Douglas Charles Abbott: No.


Gordon Graydon: That is what you said.


Douglas Charles Abbott: There cannot be two taxes. I cited the case where the husband transferred all his property to the wife. Under the law as it stood, while the income would be deemed to be in his hands, there would be nothing out of which the department could collect. Under this amendment, while it will still be deemed to be in his hands, they can collect the tax from the wife who has the revenue producing assets.


Mr. Cardiff:: Would that not lessen the tax he has to pay by $1,000?


Douglas Charles Abbott: The tax is only paid once. It is not paid twice.


Lewis Elston Cardiff: You cannot collect both from the wife and the husband.


Douglas Charles Abbott: That is correct. The tax is only paid once.


[Stage Direction]
Section agreed to.
Section 18 agreed to.
On section 19-Refunds.
Donald Methuen Fleming: The present section 52, subsection 1, provides for the making of refunds even without an application therefor on the part of the taxpayer. The amendments proposed in section 19 of the bill seem to eliminate the provision that no application need be made for the refund. If you look at the provisions of the proposed new subsection 1 of section 52 you will see that the minister

shall make a refund of an overpayment if (a) the return is made within two years from the end of the year, and (b) application in writing for the refund was made by the taxpayer before the expiration of one year, et cetera. You will notice that paragraphs (a) and (b) are cumulative requirements. It seems to me that there is no provision here for the making of a refund apart from application therefor on the part of the taxpayer. Why should that be? I am sure the present section has not worked any injustice against the crown, and I doubt very much if it has worked any administrative hardship on the Department of National Revenue. Therefore why should this limitation be placed upon the scope of the refund provision? It seems to me that from this point of view the present section is infinitely fairer than the proposed new section.


Douglas Charles Abbott: I am informed that if there is an overpayment the assessment notice points that out and says that no application for refund is needed. However, if something else comes up within a year after the assessment then an application in writing for the refund must be made by the taxpayer provided the return of income for the year was made within two years from the end of the year.


Donald Methuen Fleming: That explanation does not cover the whole ground of my objection by any means. I do not know whether the minister followed the point I am trying to make. The proposed new section 52, subsection 1, will completely eliminate any right on the part of the taxpayer to a refund, even if otherwise completely entitled thereto, unless he makes application in writing for it. There are two requirements attached to his right to receive a refund. The first is that he must make his return of income within the stipulated period, and he must make application in writing for the refund. In his explanation it seems to me that the minister has not given any reason for departing from the present rule as found in the present section 52, subsection 1, of the act. Surely in cases of this kind what we want to do is to see that anybody who has overpaid his tax receives his refund, and not to set up more requirements which make it very easy for someone to overlook the fact that he must make his application in writing within the stipulated period. Surely what we wish to do is to see to it that everybody who has overpaid receives his refund with a minimum of administrative obstacles put in his way. If we wish to we can strangle this right by applying a whole lot of requirements with regard to the method by which the application for the refund must be made.


Douglas Charles Abbott: We are standing a number of other sections, and perhaps we might allow this section to stand and I will have a further look at it.


Gordon Knapman Fraser: When the minister is looking at that will he ascertain whether, when a taxpayer in making out his income tax form puts at the bottom that he has overpaid so much, that does not constitute his application for refund?


Douglas Charles Abbott: I think that is the whole point.


Gordon Knapman Fraser: He puts at the bottom that he has overpaid so much. That is his application.


Douglas Charles Abbott: That is the application.
Section stands.
On section 20-Non-profit corporation.


Douglas Charles Abbott: I have an amendment which I will ask one of my colleagues to move. It is rather long, and relates to these charitable organizations for which we introduced a provision for tax deduction last year. It arises out of representations that have been made to us that certain charitable foundations might not qualify under the law as it stood.


James Garfield Gardiner: I move:
That paragraph (eb) set out in subclause (1) of clause 20 be deleted and the following substituted therefor:
"(eb) a corporation that was constituted exclusively for charitable purposes, no part of whose income was payable to, or was otherwise available for the personal benefit of, any proprietor, member or shareholder thereof, that has not, since June 1, 1950, acquired control of any other corporation and that, during the period,
(i)	did not carry on any business,
(ii)	had no debts incurred since June 1, 1950, other than obligations arising in respect of salaries, rents and other current operating expenses, and
(iii)	except in the case of a corporation that was, before the first day of January, 1940, constituted exclusively for charitable purposes, expended amounts each of which is
(A)	an expenditure in respect of charitable activities carried on by the corporation itself,
(B)	a gift to an organization in Canada the income of which for the period is exempt from tax under this part by virtue of paragraph (ea), or
(C)	a gift to a corporation resident in Canada the income of which for the period is exempt from tax under this part by virtue of this paragraph, and the aggregate of which is not less than 90 per cent of the corporation's income for the period,"


Douglas Charles Abbott: Perhaps this amendment
might stand so that hon. members can read it in Hansard. It is a purely technical change in the section as printed in the bill. The change is to cover a particular case that was brought to my attention in connection with the wording. If we can proceed to section 80709-259
Income Tax Act
21, there is a short statement I should like to make before we rise and report progress. It will only take two or three minutes.
Section stands.
On section 21-Armed forces.


Douglas Charles Abbott: This section relates to the
special method of collecting taxes from the armed forces. I think we had a very helpful and interesting discussion on this subject, not so much with respect to the new tax collection method from the armed forces but with respect to the desirability of exempting armed forces who are serving in theatres of war or abroad from income tax. I outlined the reasons why I felt the system we followed during the last war was not satisfactory. A good many hon. members expressed their views as to what should be done, and I think it fair to say the general feeling was that special consideration should be given to those members of our forces now serving in Korea and who may be serving in other theatres of war. Suggestions were made that there should be a special increased exemption. I put forward the tentative suggestion that it might be covered by combat pay or something of the sort, but in any case I undertook to give the matter further consideration and see what could be done. The giving of a special, additional exemption of course would involve such inequities as would result from the differing incomes of soldiers. The higher ranking personnel would receive the greater benefit from the exemption, and those with private incomes would also receive a greater benefit.
That can be overcome, however, by using the tax credit method. I am going to propose that we give a tax credit of $1 a day or up to $365 a year for members of the armed forces serving outside Canada, which in the present case would be those serving in Korea. A discretion would be given to determine what geographical areas would render personnel eligible for the tax credit. In effect that would provide an additional exemption of up to $1,900 to the lowest paid other rank. In the case of a single officer it would probably extend to a captain, and of course in the case of a married officer it would go very much higher.
It seems to me that has a good deal to commend it. While this is not the governing factor, simplicity and ease of administration from the point of view of the forces of course is important, and the $1 a day device makes it very easy for the paymaster to calculate just how much tax credit a serviceman is entitled to. I think the general feeling was that it should apply only to those serving in

Income Tax Act
foreign theatres, that it should not apply to those at headquarters or those doing garrison duty in Canada.
I will not ask the house to debate this amendment this afternoon, but I was anxious to announce that this is the position we have taken. I hope it will commend itself to hon. members generally, and particularly to those who have had some experience with the forces. I do not say it is generous, perhaps nothing could be too generous in this connection; but I think it is a practical, fair way of recognizing the special contribution being made by these members of our armed forces. I would like the amendment put formally, so hon. members may read it in Hansard.


Gordon Knapman Fraser: Will it cover those in the United States?


Douglas Charles Abbott: Perhaps I might read it and then ask my colleague to move it.
That the introductory words of subclause (1) ol clause 21 be deleted and the following substituted therefor:
"21. (1) The said act is further amended by inserting the following heading and sections after section sixty thereof:"
and that the said subclause (1) be further amended by inserting the following section immediately after section 60A of The Income Tax Act as set out therein:
"60B. There shall be deducted from
(a)	the tax for the year otherwise payable under this part, and
(b)	the tax for a month otherwise payable under section 60A,
of a member of the naval, army or air forces of Canada an amount equal to $1 for each day in the year or month, as the case may be, during which he was on duty as a member of the naval, army or air forces of Canada in a zone outside Canada prescribed by a regulation made on the recommendation of the Minister of Finance." and that subclause (2) of the said clause 21 be deleted and the following substituted therefor:
"(2) Section sixty A of The Income Tax Act as enacted by subsection one is applicable to the month of July, 1951, and subsequent months and section sixty B of The Income Tax Act as enacted by subsection one is applicable to the 1951 and subsequent taxation years."
It was felt that someone had to take the responsibility for bringing in a regulation determining the geographical area in which this special provision would apply; and since it is a tax credit it seemed, appropriate that the Minister of Finance should take that responsibility, and that is the form in which the amendment is prepared. I would ask one of my colleagues to formally move it and it can stand, to be discussed later.


James Garfield Gardiner: I move accordingly.


Alphonse Fournier: I move that the committee rise and report progress and ask leave to sit again.
Motion agreed to and progress reported.



CRIMINAL CODE


[Stage Direction]
The house resumed consideration in committee of Bill No. 357, to amend the Criminal Code (race meetings)-Mr. Gardiner-Mr. Dion in the chair.
On section 1-Exceptions.
Alphonse Fournier: I move:
That subclause (ii) of subsection (d) of section (1) of the bill be withdrawn and the following substituted therefor:
(ii) no more than eight races or dashes, or four heat races of three heats each, shall be held during any twenty-four hour period, and


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
Title agreed to.
Bill reported.
Mr. Speaker:: When shall this bill be read the third time?


Some hon. Members:: Now.


An hon. Member:: By leave.


James Garfield Gardiner: the third reading of the bill.


[Stage Direction]
Motion agreed to, and bill read the third time and passed.

Alphonse Fournier: the adjournment of the house.
He said: Tomorrow we will go into supply and consider first the estimates of the Department of Defence Production, and some time during the day we will take up the estimates of trade and commerce. If we should be fortunate enough to pass all those items the Minister of Agriculture will proceed with his estimates.
Motion agreed to and the house adjourned at 5.50 p.m.

Thursday, June 14, 1951